Minnesota Office of the Revisor of Statutes
[*Add Subtitle/link: Office]

Menu

Revisor of Statutes Menu

Pdf

Minnesota Session Laws

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

CHAPTER 136--S.F.No. 145
An act
relating to energy; modifying and adding provisions relating to energy
efficiency and conservation, energy savings and audits, energy projects
and information, residential energy requirements, a nuclear energy study,
community-based energy development and related issues, the reliability
administrator, an electricity resource assessment, wind energy conversion
systems and authority of counties, greenhouse gas emissions and renewable
energy standards; requiring studies; making technical and clarifying changes;
amending Minnesota Statutes 2006, sections 123B.65, subdivision 2; 216B.16,
subdivisions 1, 6b; 216B.1612, subdivisions 1, 2, 3, 4, 5, 7, by adding a
subdivision; 216B.1645, by adding a subdivision; 216B.1691, subdivisions 5, as
amended, 7, as added, by adding a subdivision; 216B.241; 216C.05; 216C.052;
216C.31; 471.345, subdivision 13; 500.30, subdivision 2; 504B.161, subdivision
1; proposing coding for new law in Minnesota Statutes, chapters 216B; 216C;
216F; proposing coding for new law as Minnesota Statutes, chapter 216H;
repealing Minnesota Statutes 2006, sections 216B.165; 216C.27; 216C.30,
subdivision 5; Minnesota Rules, parts 7635.0100; 7635.0110; 7635.0120;
7635.0130; 7635.0140; 7635.0150; 7635.0160; 7635.0170; 7635.0180;
7635.0200; 7635.0210; 7635.0220; 7635.0230; 7635.0240; 7635.0250;
7635.0260; 7635.0300; 7635.0310; 7635.0320; 7635.0330; 7635.0340;
7635.0400; 7635.0410; 7635.0420; 7635.0500; 7635.0510; 7635.0520;
7635.0530; 7635.0600; 7635.0610; 7635.0620; 7635.0630; 7635.0640;
7635.1000; 7635.1010; 7635.1020; 7635.1030; 7655.0100; 7655.0120;
7655.0200; 7655.0210; 7655.0220; 7655.0230; 7655.0240; 7655.0250;
7655.0260; 7655.0270; 7655.0280; 7655.0290; 7655.0300; 7655.0310;
7655.0320; 7655.0330; 7655.0400; 7655.0410; 7655.0420.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

ARTICLE 1
GENERAL PROVISIONS

    Section 1. TITLE.
    This act may be cited as the Next Generation Energy Act of 2007.

    Sec. 2. Minnesota Statutes 2006, section 216C.05, is amended to read:
216C.05 FINDINGS AND PURPOSE.
    Subdivision 1. Energy planning. The legislature finds and declares that continued
growth in demand for energy will cause severe social and economic dislocations, and that
the state has a vital interest in providing for: increased efficiency in energy consumption,
the development and use of renewable energy resources wherever possible, and the
creation of an effective energy forecasting, planning, and education program.
    The legislature further finds and declares that the protection of life, safety, and
financial security for citizens during an energy crisis is of paramount importance.
    Therefore, the legislature finds that it is in the public interest to review, analyze, and
encourage those energy programs that will minimize the need for annual increases in
fossil fuel consumption by 1990 and the need for additional electrical generating plants,
and provide for an optimum combination of energy sources consistent with environmental
protection and the protection of citizens.
    The legislature intends to monitor, through energy policy planning and
implementation, the transition from historic growth in energy demand to a period when
demand for traditional fuels becomes stable and the supply of renewable energy resources
is readily available and adequately utilized.
    Subd. 2. Energy policy goals. It is the energy policy of the state of Minnesota that:
    (1) the per capita use of fossil fuel as an energy input be reduced by 15 percent by
the year 2015, through increased reliance on energy efficiency and renewable energy
alternatives; and
    (2) 25 percent of the total energy used in the state be derived from renewable energy
resources by the year 2025.

ARTICLE 2
ENERGY EFFICIENCY AND CONSERVATION

    Section 1. Minnesota Statutes 2006, section 216B.16, subdivision 1, is amended to read:
    Subdivision 1. Notice. Unless the commission otherwise orders, no public utility
shall change a rate which has been duly established under this chapter, except upon 60
days' notice to the commission. The notice shall include statements of facts, expert
opinions, substantiating documents, and exhibits, supporting the change requested, and
state the change proposed to be made in the rates then in force and the time when the
modified rates will go into effect. If the filing utility does not have an approved energy
conservation improvement plan on file with the department, it shall also include in its
notice an energy conservation plan pursuant to section 216B.241. A filing utility subject to
rate regulation under section 216B.026 shall reference in its notice the energy conservation
improvement plans of the generation and transmission cooperative providing energy
conservation improvement programs to members of the filing utility pursuant to section
216B.241. The filing utility shall give written notice, as approved by the commission, of
the proposed change to the governing body of each municipality and county in the area
affected. All proposed changes shall be shown by filing new schedules or shall be plainly
indicated upon schedules on file and in force at the time.

    Sec. 2. Minnesota Statutes 2006, section 216B.16, subdivision 6b, is amended to read:
    Subd. 6b. Energy conservation improvement. (a) Except as otherwise provided
in this subdivision, all investments and expenses of a public utility as defined in
section 216B.241, subdivision 1, paragraph (e) (i), incurred in connection with energy
conservation improvements shall be recognized and included by the commission in the
determination of just and reasonable rates as if the investments and expenses were directly
made or incurred by the utility in furnishing utility service.
    (b) After December 31, 1999, Investments and expenses for energy conservation
improvements shall not be included by the commission in the determination of (i) just and
reasonable electric and gas rates for retail electric and gas service provided to large electric
customer facilities that have been exempted by the commissioner of the department
pursuant to section 216B.241, subdivision 1a, paragraph (b); or (ii) just and reasonable
gas rates for large energy facilities. However, no public utility shall be prevented from
recovering its investment in energy conservation improvements from all customers that
were made on or before December 31, 1999, in compliance with the requirements of
section 216B.241.
    (c) The commission may permit a public utility to file rate schedules providing for
annual recovery of the costs of energy conservation improvements. These rate schedules
may be applicable to less than all the customers in a class of retail customers if necessary to
reflect the differing minimum spending requirements of section 216B.241, subdivision 1a.
After December 31, 1999,. The commission shall allow a public utility, without requiring
a general rate filing under this section, to reduce the electric and gas rates applicable to
large electric customer facilities that have been exempted by the commissioner of the
department pursuant to section 216B.241, subdivision 1a, paragraph (b), and to reduce the
gas rate applicable to a large energy facility by an amount that reflects the elimination
of energy conservation improvement investments or expenditures for those facilities
required on or before December 31, 1999. In the event that the commission has set
electric or gas rates based on the use of an accounting methodology that results in the cost
of conservation improvements being recovered from utility customers over a period of
years, the rate reduction may occur in a series of steps to coincide with the recovery of
balances due to the utility for conservation improvements made by the utility on or before
December 31, 1999 2007.
    (d) Investments and expenses of a public utility shall not include electric utility
infrastructure costs as defined in section 216B.1636, subdivision 1, paragraph (b).

    Sec. 3. [216B.1636] RECOVERY OF ELECTRIC UTILITY INFRASTRUCTURE
COSTS.
    Subdivision 1. Definitions. (a) "Electric utility" means a public utility as defined in
section 216B.02, subdivision 4, that furnishes electric service to retail customers.
    (b) "Electric utility infrastructure costs" or "EUIC" means costs for electric utility
infrastructure projects that were not included in the electric utility's rate base in its most
recent general rate case.
    (c) "Electric utility infrastructure projects" means projects owned by an electric
utility that:
    (1) replace or modify existing electric utility infrastructure, including utility-owned
buildings, if the replacement or modification is shown to conserve energy or use energy
more efficiently, consistent with section 216B.241, subdivision 1c; or
    (2) conserve energy or use energy more efficiently by using waste heat recovery
converted into electricity as defined in section 216B.241, subdivision 1, paragraph (n).
    Subd. 2. Filing. (a) The commission may approve an electric utility's petition for
a rate schedule to recover EUIC under this section. An electric utility may petition the
commission to recover a rate of return, income taxes on the rate of return, incremental
property taxes, if any, plus incremental depreciation expense associated with EUIC.
    (b) The filing is subject to the following:
    (1) an electric utility may submit a filing under this section no more than once
per year; and
    (2) an electric utility must file sufficient information to satisfy the commission
regarding the proposed EUIC or be subject to denial by the commission. The information
includes, but is not limited to:
    (i) the location, description, and costs associated with the project;
    (ii) evidence that the electric utility infrastructure project will conserve energy or use
energy more efficiently than similar utility facilities currently used by the electric utility;
    (iii) the proposed schedule for implementation;
    (iv) a description of the costs, and salvage value, if any, associated with the existing
infrastructure replaced or modified as a result of the project;
    (v) the proposed rate design and an explanation of why the proposed rate design
is in the public interest;
    (vi) the magnitude and timing of any known future electric utility projects that the
utility may seek to recover under this section;
    (vii) the magnitude of EUIC in relation to the electric utility's base revenue as
approved by the commission in the electric utility's most recent general rate case,
exclusive of fuel cost adjustments;
    (viii) the magnitude of EUIC in relation to the electric utility's capital expenditures
since its most recent general rate case;
    (ix) the amount of time since the utility last filed a general rate case and the utility's
reasons for seeking recovery outside of a general rate case;
    (x) documentation supporting the calculation of the EUIC; and
    (xi) a cost and benefit analysis showing that the electric utility infrastructure project
is in the public interest.
    (c) Upon approval of the proposed projects and associated EUIC rate schedule, the
utility may implement the electric utility infrastructure projects.
    Subd. 3. Commission authority; orders. The commission may issue orders
necessary to implement and administer this section.

    Sec. 4. [216B.2401] ENERGY CONSERVATION POLICY GOAL.
    It is the energy policy of the state of Minnesota to achieve annual energy savings
equal to 1.5 percent of annual retail energy sales of electricity and natural gas directly
through energy conservation improvement programs and rate design, and indirectly
through energy codes and appliance standards, programs designed to transform the market
or change consumer behavior, energy savings resulting from efficiency improvements to
the utility infrastructure and system, and other efforts to promote energy efficiency and
energy conservation.

    Sec. 5. Minnesota Statutes 2006, section 216B.241, is amended to read:
216B.241 ENERGY CONSERVATION IMPROVEMENT.
    Subdivision 1. Definitions. For purposes of this section and section 216B.16,
subdivision 6b
, the terms defined in this subdivision have the meanings given them.
    (a) "Commission" means the Public Utilities Commission.
    (b) "Commissioner" means the commissioner of commerce.
    (c) "Customer facility" means all buildings, structures, equipment, and installations
at a single site.
    (d) "Department" means the Department of Commerce.
    (e) "Energy conservation" means demand-side management of energy supplies
resulting in a net reduction in energy use. Load management that reduces overall energy
use is energy conservation.
    (f) "Energy conservation improvement" means a project that results in energy
efficiency or energy conservation. Energy conservation improvement may include waste
heat recovery converted into electricity but does not include electric utility infrastructure
projects approved by the commission under section 216B.1636.
    (g) "Energy efficiency" means measures or programs, including energy conservation
measures or programs, that target consumer behavior, equipment, processes, or devices
designed to produce either an absolute decrease in consumption of electric energy or
natural gas or a decrease in consumption of electric energy or natural gas on a per unit
of production basis without a reduction in the quality or level of service provided to
the energy consumer.
    (g) (h) "Gross annual retail energy sales" means annual electric sales to all retail
customers in a utility's or association's Minnesota service territory or natural gas
throughput to all retail customers, including natural gas transportation customers, on a
utility's distribution system in Minnesota. For purposes of this section, gross annual
retail energy sales exclude gas sales to a large energy facility and gas and electric sales
to a large electric customer facility exempted by the commissioner under subdivision
1a, paragraph (b).
    (i) "Investments and expenses of a public utility" includes the investments and
expenses incurred by a public utility in connection with an energy conservation
improvement, including but not limited to:
    (1) the differential in interest cost between the market rate and the rate charged on a
no-interest or below-market interest loan made by a public utility to a customer for the
purchase or installation of an energy conservation improvement;
    (2) the difference between the utility's cost of purchase or installation of energy
conservation improvements and any price charged by a public utility to a customer for
such improvements.
    (h) (j) "Large electric customer facility" means a customer facility that imposes a
peak electrical demand on an electric utility's system of not less than 20,000 kilowatts,
measured in the same way as the utility that serves the customer facility measures
electrical demand for billing purposes, and for which electric services are provided at
retail on a single bill by a utility operating in the state.
    (i) (k) "Large energy facility" has the meaning given it in section 216B.2421,
subdivision 2, clause (1).
    (l) "Load management" means an activity, service, or technology to change the
timing or the efficiency of a customer's use of energy that allows a utility or a customer
to respond to wholesale market fluctuations or to reduce the overall peak demand for
energy or capacity.
    (m) "Low-income programs" means energy conservation improvement programs
that directly serve the needs of low-income persons, including low-income renters.
    (n) "Waste heat recovery converted into electricity" means an energy recovery
process that converts otherwise lost energy from the heat of exhaust stacks or pipes used
for engines or manufacturing or industrial processes, or the reduction of high pressure
in water or gas pipelines.
    Subd. 1a. Investment, expenditure, and contribution; public utility. (a) For
purposes of this subdivision and subdivision 2, "public utility" has the meaning given it
in section 216B.02, subdivision 4. Each public utility shall spend and invest for energy
conservation improvements under this subdivision and subdivision 2 the following
amounts:
    (1) for a utility that furnishes gas service, 0.5 percent of its gross operating revenues
from service provided in the state;
    (2) for a utility that furnishes electric service, 1.5 percent of its gross operating
revenues from service provided in the state; and
    (3) for a utility that furnishes electric service and that operates a nuclear-powered
electric generating plant within the state, two percent of its gross operating revenues
from service provided in the state.
    For purposes of this paragraph (a), "gross operating revenues" do not include
revenues from large electric customer facilities exempted by the commissioner under
paragraph (b).
    (b) The owner of a large electric customer facility may petition the commissioner
to exempt both electric and gas utilities serving the large energy customer facility from
the investment and expenditure requirements of paragraph (a) with respect to retail
revenues attributable to the facility. At a minimum, the petition must be supported by
evidence relating to competitive or economic pressures on the customer and a showing
by the customer of reasonable efforts to identify, evaluate, and implement cost-effective
conservation improvements at the facility. If a petition is filed on or before October 1 of
any year, the order of the commissioner to exempt revenues attributable to the facility can
be effective no earlier than January 1 of the following year. The commissioner shall
not grant an exemption if the commissioner determines that granting the exemption is
contrary to the public interest. The commissioner may, after investigation, rescind any
exemption granted under this paragraph upon a determination that cost-effective the
customer is not continuing to make reasonable efforts to identify, evaluate, and implement
energy conservation improvements are available at the large electric customer facility.
For the purposes of this paragraph, "cost-effective" means that the projected total cost of
the energy conservation improvement at the large electric customer facility is less than
the projected present value of the energy and demand savings resulting from the energy
conservation improvement. For the purposes of investigations by the commissioner under
this paragraph, the owner of any large electric customer facility shall, upon request,
provide the commissioner with updated information comparable to that originally supplied
in or with the owner's original petition under this paragraph.
    (c) The commissioner may require investments or spending greater than the amounts
required under this subdivision for a public utility whose most recent advance forecast
required under section 216B.2422 or 216C.17 projects a peak demand deficit of 100
megawatts or greater within five years under midrange forecast assumptions.
    (d) A public utility or owner of a large electric customer facility may appeal
a decision of the commissioner under paragraph (b) or (c) to the commission under
subdivision 2. In reviewing a decision of the commissioner under paragraph (b) or (c),
the commission shall rescind the decision if it finds that the required investments or
spending will:
    (1) not result in cost-effective energy conservation improvements; or
    (2) otherwise not be in the public interest.
    (e) Each utility shall determine what portion of the amount it sets aside for
conservation improvement will be used for conservation improvements under subdivision
2 and what portion it will contribute to the energy and conservation account established in
subdivision 2a. A public utility may propose to the commissioner to designate that all
or a portion of funds contributed to the account established in subdivision 2a be used
for research and development projects that can best be implemented on a statewide
basis. Contributions must be remitted to the commissioner by February 1 of each year.
Nothing in this subdivision prohibits a public utility from spending or investing for energy
conservation improvement more than required in this subdivision.
    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 more than 1,000,000,000 cubic feet in annual throughput sales to 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 energy facility or 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 50 percent of the conservation
investment and spending requirements of this subdivision.
    (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) At least every four years, on a schedule determined by the commissioner, each
municipality or cooperative shall file an overview of its conservation improvement plan
with the commissioner. With this overview, Each municipality or cooperative shall file
energy conservation improvement plans by June 1 on a schedule determined by order
of the commissioner, but at least every three years. Plans received by June 1 must be
approved or approved as modified by the commissioner by December 1 of the same year.
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 and
evaluation filed by a municipality with less than 60,000,000 kilowatt-hours in annual
retail sales 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) (h) 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 until July 1, 2007. From July 1, 2007, through June 30, 2011, expenditures made
to refurbish a district heating or cooling system are considered to be load-management
activities under paragraph (e). This paragraph expires July 1, 2011.
    (i) The commissioner shall consider and may require a utility, association, or
other entity providing energy efficiency and conservation services under this section to
undertake a program suggested by an outside source, including a political subdivision,
nonprofit corporation, or community organization.
    Subd. 1c. Energy-saving goals. (a) The commissioner shall establish energy-saving
goals for energy conservation improvement expenditures and shall evaluate an energy
conservation improvement program on how well it meets the goals set.
    (b) Each individual utility and association shall have an annual energy-savings
goal equivalent to 1.5 percent of gross annual retail energy sales unless modified by the
commissioner under paragraph (d). The savings goals must be calculated based on the
most recent three-year weather normalized average.
    (c) The commissioner must adopt a filing schedule that is designed to have all
utilities and associations operating under an energy savings plan by calendar year 2010.
    (d) In its energy conservation improvement plan filing, a utility or association may
request the commissioner to adjust its annual energy savings percentage goal based on
its historical conservation investment experience, customer class makeup, load growth,
a conservation potential study, or other factors the commissioner determines warrants
an adjustment. The commissioner may not approve a plan that provides for an annual
energy savings goal of less than one percent of gross annual retail energy sales from
energy conservation improvements. A utility or association may include in its energy
conservation plan energy savings from electric utility infrastructure projects approved
by the commission under section 216B.1636 or waste heat recovery converted into
electricity projects that may count as energy savings in addition to the minimum energy
savings goal of at least one percent for energy conservation improvements. Electric utility
infrastructure projects must result in increased energy efficiency greater than that which
would have occurred through normal maintenance activity.
    (e) An energy savings goal is not satisfied by attaining the revenue expenditure
requirements of subdivisions 1a and 1b, but can only be satisfied by meeting the energy
savings goal established in this subdivision.
    (f) An association or utility is not required to make energy conservation investments
to attain the energy savings goals of this subdivision that are not cost-effective even
if the investment is necessary to attain the energy savings goals. For the purpose of
this paragraph, in determining cost-effectiveness, the commissioner shall consider the
costs and benefits to ratepayers, the utility, participants, and society. In addition, the
commissioner shall consider the rate at which an association or municipal utility is
increasing its energy savings and its expenditures on energy conservation.
    (g) On an annual basis, the commissioner shall produce and make publicly available
a report on the annual energy savings and estimated carbon dioxide reductions achieved
by the energy conservation improvement programs for the two most recent years for
which data is available. The commissioner shall report on program performance both in
the aggregate and for each entity filing an energy conservation improvement plan for
approval or review by the commissioner.
    (h) By January 15, 2010, the commissioner shall report to the legislature whether the
spending requirements under subdivisions 1a and 1b are necessary to achieve the energy
savings goals established in this subdivision.
    Subd. 1d. Cooperative conservation investment increase phase-in Technical
assistance. The increase in required conservation improvement expenditures by a
cooperative electric association that results from the amendments in Laws 2001, chapter
212, article 8, section 6, to subdivision 1b, paragraph (a), clause (1), must be phased
in as follows:
    (1) at least 25 percent shall be effective in year 2002;
    (2) at least 50 percent shall be effective in year 2003;
    (3) at least 75 percent shall be effective in year 2004; and
    (4) all of the increase shall be effective in year 2005 and thereafter.
    The commissioner shall evaluate energy conservation improvement programs
on the basis of cost-effectiveness and the reliability of the technologies employed.
The commissioner shall, by order, establish, maintain, and update energy savings
assumptions that must be used when filing energy conservation improvement programs.
The commissioner shall establish an inventory of the most effective energy conservation
programs, techniques, and technologies, and encourage all Minnesota utilities to
implement them, where appropriate, in their service territories. The commissioner shall
describe these programs in sufficient detail to provide a utility reasonable guidance
concerning implementation. The commissioner shall prioritize the opportunities in
order of potential energy savings and in order of cost-effectiveness. The commissioner
may contract with a third party to carry out any of the commissioner's duties under
this subdivision, and to obtain technical assistance to evaluate the effectiveness of any
conservation improvement program. The commissioner may assess up to $800,000
annually until June 30, 2009, and $450,000 annually thereafter for the purposes of this
subdivision. The assessments must be deposited in the state treasury and credited to the
energy and conservation account created under subdivision 2a. An assessment made under
this subdivision is not subject to the cap on assessments provided by section 216B.62, or
any other law.
    Subd. 1e. Applied research and development grants. The commissioner may, by
order, approve and make grants for applied research and development projects of general
applicability that identify new technologies or strategies to maximize energy savings,
improve the effectiveness of energy conservation programs, or document the carbon
dioxide reductions from energy conservation programs. When approving projects, the
commissioner shall consider proposals and comments from utilities and other interested
parties. The commissioner may assess up to $3,600,000 annually for the purposes of this
subdivision. The assessments must be deposited in the state treasury and credited to the
energy and conservation account created under subdivision 2a. An assessment made under
this subdivision is not subject to the cap on assessments provided by section 216B.62, or
any other law.
    Subd. 1f. Facilities energy efficiency. (a) The commissioner of administration and
the commissioner of commerce shall maintain and, as needed, revise the sustainable
building design guidelines developed under section 16B.325.
    (b) The commissioner of administration and the commissioner of commerce shall
maintain and update the benchmarking tool developed under Laws 2001, chapter 212,
article 1, section 3, so that all public buildings can use the benchmarking tool to maintain
energy use information for the purposes of establishing energy efficiency benchmarks,
tracking building performance, and measuring the results of energy efficiency and
conservation improvements.
    (c) The commissioner shall require that utilities include in their conservation
improvement plans programs that facilitate professional engineering verification to qualify
a building as Energy Star-labeled, Leadership in Energy and Environmental Design
(LEED) certified, or Green Globes-certified. The state goal is to achieve certification of
1,000 commercial buildings as Energy Star-labeled, and 100 commercial buildings as
LEED-certified or Green Globes-certified by December 31, 2010.
    (d) The commissioner may assess up to $500,000 annually for the purposes of this
subdivision. The assessments must be deposited in the state treasury and credited to the
energy and conservation account created under subdivision 2a. An assessment made under
this subdivision is not subject to the cap on assessments provided by section 216B.62, or
any other law.
    Subd. 2. Programs. (a) The commissioner may require public utilities to make
investments and expenditures in energy conservation improvements, explicitly setting
forth the interest rates, prices, and terms under which the improvements must be offered to
the customers. The required programs must cover no more than a four-year three-year
period. Public utilities shall file conservation improvement plans by June 1, on a schedule
determined by order of the commissioner, but at least every four three years. Plans
received by a public utility by June 1 must be approved or approved as modified by the
commissioner by December 1 of that same year. The commissioner shall give special
consideration and encouragement to programs that bring about significant net savings
through the use of energy-efficient lighting. The commissioner shall evaluate the program
on the basis of cost-effectiveness and the reliability of technologies employed. The
commissioner's order must provide to the extent practicable for a free choice, by consumers
participating in the program, of the device, method, material, or project constituting the
energy conservation improvement and for a free choice of the seller, installer, or contractor
of the energy conservation improvement, provided that the device, method, material, or
project seller, installer, or contractor is duly licensed, certified, approved, or qualified,
including under the residential conservation services program, where applicable.
    (b) The commissioner may require a utility to make an energy conservation
improvement investment or expenditure whenever the commissioner finds that the
improvement will result in energy savings at a total cost to the utility less than the cost
to the utility to produce or purchase an equivalent amount of new supply of energy. The
commissioner shall nevertheless ensure that every public utility operate one or more
programs under periodic review by the department.
    (c) Each public utility subject to subdivision 1a 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 section by the utility on research and development projects
that meet the definition of energy conservation improvement in subdivision 1 and that
are funded directly by the public utility.
    (d) A public utility may not spend for or invest in energy conservation improvements
that directly benefit a large energy facility or a large electric customer facility for which
the commissioner has issued an exemption pursuant to subdivision 1a, paragraph (b). The
commissioner shall consider and may require a utility to undertake a program suggested
by an outside source, including a political subdivision or, a nonprofit corporation, or
community organization.
    (e) The commissioner may, by order, establish a list of programs that may be
offered as energy conservation improvements by a public utility, municipal utility,
cooperative electric association, or other entity providing conservation services pursuant
to this section. The list of programs may include rebates for high-efficiency appliances,
rebates or subsidies for high-efficiency lamps, small business energy audits, and building
recommissioning. The commissioner may, by order, change this list to add or subtract
programs as the commissioner determines is necessary to promote efficient and effective
conservation programs.
    (f) The commissioner shall ensure that 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, in proportion to the amount the utility has
historically spent on such programs based on the most recent three-year average relative to
the utility's total conservation spending under this section, unless an insufficient number of
appropriate programs are available.
    (g) (e) A utility, a political subdivision, or a nonprofit or community organization
that has suggested a program, the attorney general acting on behalf of consumers and
small business interests, or a utility customer that has suggested a program and is not
represented by the attorney general under section 8.33 may petition the commission to
modify or revoke a department decision under this section, and the commission may do
so if it determines that the program is not cost-effective, does not adequately address the
residential conservation improvement needs of low-income persons, has a long-range
negative effect on one or more classes of customers, or is otherwise not in the public
interest. The commission shall reject a petition that, on its face, fails to make a reasonable
argument that a program is not in the public interest.
    (h) (f) The commissioner may order a public utility to include, with the filing of the
utility's proposed conservation improvement plan under paragraph (a), the results of an
independent audit of the utility's conservation improvement programs and expenditures
performed by the department or an auditor with experience in the provision of energy
conservation and energy efficiency services approved by the commissioner and chosen by
the utility. The audit must specify the energy savings or increased efficiency in the use
of energy within the service territory of the utility that is the result of the spending and
investments. The audit must evaluate the cost-effectiveness of the utility's conservation
programs.
    (i) 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
audit and evaluation.
    Subd. 2a. Energy and conservation account. The energy and conservation
account is established in the special revenue fund in the state treasury. The commissioner
must deposit money contributed under subdivisions 1a and 1b assessed or contributed
under subdivisions 1d, 1e, 1f, and 7 in the state treasury and credit it to the energy and
conservation account in the general special revenue fund. Money in the account is
appropriated to the department commissioner for programs designed to meet the energy
conservation needs of low-income persons and to make energy conservation improvements
in areas not adequately served under subdivision 2, including research and development
projects included in the definition of energy conservation improvement in subdivision 1
the purposes of subdivisions 1d, 1e, 1f, and 7. Interest on money in the account accrues to
the account. Using information collected under section 216C.02, subdivision 1, paragraph
(b)
, the commissioner must, to the extent possible, allocate enough money to programs
for low-income persons to assure that their needs are being adequately addressed.
The commissioner must request the commissioner of finance to transfer money from
the account to the commissioner of education for an energy conservation program for
low-income persons. In establishing programs, the commissioner must consult political
subdivisions and nonprofit and community organizations, especially organizations
engaged in providing energy and weatherization assistance to low-income persons. At
least one program must address the need for energy conservation improvements in areas
in which a high percentage of residents use fuel oil or propane to fuel their source of
home heating. The commissioner may contract with a political subdivision, a nonprofit
or community organization, a public utility, a municipality, or a cooperative electric
association to implement its programs. The commissioner may provide grants to any
person to conduct research and development projects in accordance with this section.
    Subd. 2b. Recovery of expenses. The commission shall allow a utility to recover
expenses resulting from a conservation improvement program required by the department
and contributions and assessments to the energy and conservation account, unless the
recovery would be inconsistent with a financial incentive proposal approved by the
commission. The commission shall allow a cooperative electric association subject
to rate regulation under section 216B.026, to recover expenses resulting from energy
conservation improvement programs, load management programs, and assessments
and contributions to the energy and conservation account unless the recovery would be
inconsistent with a financial incentive proposal approved by the commission. In addition,
a utility may file annually, or the Public Utilities Commission may require the utility
to file, and the commission may approve, rate schedules containing provisions for the
automatic adjustment of charges for utility service in direct relation to changes in the
expenses of the utility for real and personal property taxes, fees, and permits, the amounts
of which the utility cannot control. A public utility is eligible to file for adjustment for real
and personal property taxes, fees, and permits under this subdivision only if, in the year
previous to the year in which it files for adjustment, it has spent or invested at least 1.75
percent of its gross revenues from provision of electric service, excluding gross operating
revenues from electric service provided in the state to large electric customer facilities for
which the commissioner has issued an exemption under subdivision 1a, paragraph (b), and
0.6 percent of its gross revenues from provision of gas service, excluding gross operating
revenues from gas services provided in the state to large electric customer facilities for
which the commissioner has issued an exemption under subdivision 1a, paragraph (b), for
that year for energy conservation improvements under this section.
    Subd. 2c. Performance incentives. By December 31, 2008, the commission
shall review any incentive plan for energy conservation improvement it has approved
under section 216B.16, subdivision 6c, and adjust the utility performance incentives to
recognize making progress toward and meeting the energy savings goals established
in subdivision 1c.
    Subd. 3. Ownership of energy conservation improvement. An energy
conservation improvement made to or installed in a building in accordance with this
section, except systems owned by the utility and designed to turn off, limit, or vary the
delivery of energy, are the exclusive property of the owner of the building except to the
extent that the improvement is subjected to a security interest in favor of the utility in case
of a loan to the building owner. The utility has no liability for loss, damage or injury
caused directly or indirectly by an energy conservation improvement except for negligence
by the utility in purchase, installation, or modification of the product.
    Subd. 4. Federal law prohibitions. If investments by public utilities in energy
conservation improvements are in any manner prohibited or restricted by federal law
and there is a provision under which the prohibition or restriction may be waived, then
the commission, the governor, or any other necessary state agency or officer shall take
all necessary and appropriate steps to secure a waiver with respect to those public utility
investments in energy conservation improvements included in this section.
    Subd. 5. Efficient lighting program. (a) Each public utility, cooperative electric
association, and municipal utility that provides electric service to retail customers shall
include as part of its conservation improvement activities a program to strongly encourage
the use of fluorescent and high-intensity discharge lamps. The program must include at
least a public information campaign to encourage use of the lamps and proper management
of spent lamps by all customer classifications.
    (b) A public utility that provides electric service at retail to 200,000 or more
customers shall establish, either directly or through contracts with other persons, including
lamp manufacturers, distributors, wholesalers, and retailers and local government units, a
system to collect for delivery to a reclamation or recycling facility spent fluorescent and
high-intensity discharge lamps from households and from small businesses as defined in
section 645.445 that generate an average of fewer than ten spent lamps per year.
    (c) A collection system must include establishing reasonably convenient locations
for collecting spent lamps from households and financial incentives sufficient to encourage
spent lamp generators to take the lamps to the collection locations. Financial incentives
may include coupons for purchase of new fluorescent or high-intensity discharge lamps,
a cash back system, or any other financial incentive or group of incentives designed to
collect the maximum number of spent lamps from households and small businesses that is
reasonably feasible.
    (d) A public utility that provides electric service at retail to fewer than 200,000
customers, a cooperative electric association, or a municipal utility that provides electric
service at retail to customers may establish a collection system under paragraphs (b) and
(c) as part of conservation improvement activities required under this section.
    (e) The commissioner of the Pollution Control Agency may not, unless clearly
required by federal law, require a public utility, cooperative electric association, or
municipality that establishes a household fluorescent and high-intensity discharge lamp
collection system under this section to manage the lamps as hazardous waste as long as
the lamps are managed to avoid breakage and are delivered to a recycling or reclamation
facility that removes mercury and other toxic materials contained in the lamps prior to
placement of the lamps in solid waste.
    (f) If a public utility, cooperative electric association, or municipal utility contracts
with a local government unit to provide a collection system under this subdivision,
the contract must provide for payment to the local government unit of all the unit's
incremental costs of collecting and managing spent lamps.
    (g) All the costs incurred by a public utility, cooperative electric association, or
municipal utility for promotion and collection of fluorescent and high-intensity discharge
lamps under this subdivision are conservation improvement spending under this section.
    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.
    Subd. 7. Low-income programs. (a) The commissioner shall ensure that each
utility and association provides low-income programs. When approving spending and
energy savings goals for low-income programs, the commissioner shall consider historic
spending and participation levels, energy savings for low-income programs, and the
number of low-income persons residing in the utility's service territory. A utility that
furnishes gas service must spend at least 0.2 percent of its gross operating revenue from
residential customers in the state on low-income programs. A utility or association that
furnishes electric service must spend at least 0.1 percent of its gross operating revenue
from residential customers in the state on low-income programs. For a generation and
transmission cooperative association, this requirement shall apply to each association's
members' aggregate gross operating revenue from sale of electricity to residential
customers in the state. Beginning in 2010, a utility or association that furnishes electric
service must spend 0.2 percent of its gross operating revenue from residential customers
in the state on low-income programs.
    (b) To meet the requirements of paragraph (a), a utility or association may contribute
money to the energy and conservation account. An energy conservation improvement plan
must state the amount, if any, of low-income energy conservation improvement funds the
utility or association will contribute to the energy and conservation account. Contributions
must be remitted to the commissioner by February 1 of each year.
    (c) The commissioner shall establish low-income programs to utilize money
contributed to the energy and conservation account under paragraph (b). In establishing
low-income programs, the commissioner shall consult political subdivisions, utilities, and
nonprofit and community organizations, especially organizations engaged in providing
energy and weatherization assistance to low-income persons. Money contributed to
the energy and conservation account under paragraph (b) must provide programs for
low-income persons, including low-income renters, in the service territory of the utility or
association providing the money. The commissioner shall record and report expenditures
and energy savings achieved as a result of low-income programs funded through the
energy and conservation account in the report required under subdivision 1c, paragraph
(g). The commissioner may contract with a political subdivision, nonprofit or community
organization, public utility, municipality, or cooperative electric association to implement
low-income programs funded through the energy and conservation account.
    (d) A utility or association may petition the commissioner to modify its required
spending under paragraph (a) if the utility or association and the commissioner have been
unable to expend the amount required under paragraph (a) for three consecutive years.
    Subd. 8. Assessment. The commission or department may assess utilities subject to
this section in proportion to their respective gross operating revenue from sales of gas or
electric service within the state during the last calendar year to carry out the purposes of
subdivisions 1d, 1e, and 1f. Those assessments are not subject to the cap on assessments
provided by section 216B.62, or any other law.

    Sec. 6. [216B.2412] DECOUPLING OF ENERGY SALES FROM REVENUES.
    Subdivision 1. Definition and purpose. For the purpose of this section,
"decoupling" means a regulatory tool designed to separate a utility's revenue from changes
in energy sales. The purpose of decoupling is to reduce a utility's disincentive to promote
energy efficiency.
    Subd. 2. Decoupling criteria. The commission shall, by order, establish criteria
and standards for decoupling. The commission shall design the criteria and standards to
mitigate the impact on public utilities of the energy savings goals under section 216B.241
without adversely affecting utility ratepayers. In designing the criteria, the commission
shall consider energy efficiency, weather, and cost of capital, among other factors.
    Subd. 3. Pilot programs. The commission shall allow one or more rate-regulated
utilities to participate in a pilot program to assess the merits of a rate-decoupling strategy
to promote energy efficiency and conservation. Each pilot program must utilize the
criteria and standards established in subdivision 2 and be designed to determine whether
a rate-decoupling strategy achieves energy savings. On or before a date established by
the commission, the commission shall require electric and gas utilities that intend to
implement a decoupling program to file a decoupling pilot plan, which shall be approved
or approved as modified by the commission. A pilot program may not exceed three years
in length. Any extension beyond three years can only be approved in a general rate case,
unless that decoupling program was previously approved as part of a general rate case.
The commission shall report on the programs annually to the chairs of the house of
representatives and senate committees with primary jurisdiction over energy policy.

    Sec. 7. [216C.03] STATE GOVERNMENT ENERGY SAVINGS PLAN.
    The commissioner of commerce, in coordination with the commissioners of the
agencies listed in section 15.01, the chancellor of the Minnesota State Colleges and
Universities, and the president of the University of Minnesota, shall identify policy
options, barriers, and economic benefits and costs for state government operations to
achieve the energy savings goals in section 216B.2401 and the resulting carbon emission
reductions. The commissioner of commerce must issue a report to the legislature by
February 1, 2008.

    Sec. 8. REVISOR'S INSTRUCTION.
    The revisor of statutes shall change the reference to "section 216B.241, subdivision
1, paragraph (i)" found in section 216B.2411, subdivision 1, to read "section 216B.241,
subdivision 1."

    Sec. 9. EFFECTIVE DATE.
    This article is effective July 1, 2007.

ARTICLE 3
MISCELLANEOUS

    Section 1. Minnesota Statutes 2006, section 123B.65, subdivision 2, is amended to read:
    Subd. 2. Energy efficiency contract. (a) Notwithstanding any law to the contrary,
a school district may enter into a guaranteed energy savings contract with a qualified
provider to significantly reduce energy or operating costs.
    (b) Before entering into a contract under this subdivision, the board shall comply
with clauses (1) to (5).
    (1) The board must seek proposals from multiple qualified providers by publishing
notice of the proposed guaranteed energy savings contract in the board's official newspaper
and in other publications if the board determines that additional publication is necessary to
notify multiple qualified providers.
    (2) The school board must select the qualified provider that best meets the needs of
the board. The board must provide public notice of the meeting at which it will select the
qualified provider.
    (3) The contract between the board and the qualified provider must describe the
methods that will be used to calculate the costs of the contract and the operational and
energy savings attributable to the contract.
    (4) The qualified provider shall issue a report to the board giving a description of all
costs of installations, modifications, or remodeling, including costs of design, engineering,
installation, maintenance, repairs, or debt service, and giving detailed calculations of the
amounts by which energy or operating costs will be reduced and the projected payback
schedule in years.
    (5) The board must provide published notice of the meeting in which it proposes to
award the contract, the names of the parties to the proposed contract, and the contract's
purpose.
    (c) The board must provide a copy of any contract entered into under paragraph (a)
and the report provided under paragraph (b), clause (4), to the commissioner of commerce
within 30 days of the effective date of the contract.

    Sec. 2. Minnesota Statutes 2006, section 216C.052, subdivision 8a, as added by Laws
2007, chapter 57, article 2, section 26, is amended to read:
    Subd. 8a. Manitoba Hydro information. By January 1, 2008, and each year
thereafter, the task force shall request the Manitoba Hydro-Electric Board to provide
the following information for each community that is a signatory to the Northern Flood
Agreement, including South Indian Lake:
    (1) median household income and number of residents employed full time and
part time;
    (2) the number of outstanding claims filed against Manitoba Hydro by individuals
and communities and the number of claims settled by Manitoba Hydro; and
    (3) the amount of shoreline damaged by flooding and erosion and the amount of
shoreline restored and cleaned.
    Nothing in this section shall be construed as a directive to the government of Canada
or the province of Manitoba.
    For the purposes of this subdivision, "Northern Flood Agreement" means the
agreement entered into by the Northern Flood Committee, Incorporated, the Manitoba
Hydro-Electric Board, the province of Manitoba, and the government of Canada on
December 16, 1977.

    Sec. 3. Minnesota Statutes 2006, section 216C.31, is amended to read:
216C.31 ENERGY AUDIT PROGRAMS.
    The commissioner shall develop and administer state programs of energy audits of
residential and commercial buildings including those required by United States Code, title
42, sections 8211 to 8222 and sections 8281 to 8284. The commissioner shall continue
to administer the residential energy audit program as originally established under the
provisions of United States Code, title 42, sections 8211 to 8222; through July 1, 1986
irrespective of any prior expiration date provided in United States Code, title 42, section
8216. The commissioner may approve temporary programs if they are likely to result
in the installation of as many conservation measures as would have been installed had
the utility met the requirements of United States Code, title 42, sections 8211 to 8222.
The Consumer Services Division and the attorney general may release information on
consumer comments about the operation of the program to the commissioner the training
and qualifications necessary for the auditing of residential and commercial buildings under
the auspices of a program created under section 216B.241.

    Sec. 4. Minnesota Statutes 2006, section 471.345, subdivision 13, is amended to read:
    Subd. 13. Energy efficiency projects. The following definitions apply to this
subdivision.
    (a) "Energy conservation measure" means a training program or facility alteration
designed to reduce energy consumption or operating costs and includes:
    (1) insulation of the building structure and systems within the building;
    (2) storm windows and doors, caulking or weatherstripping, multiglazed windows
and doors, heat absorbing or heat reflective glazed and coated window and door
systems, additional glazing, reductions in glass area, and other window and door system
modifications that reduce energy consumption;
    (3) automatic energy control systems;
    (4) heating, ventilating, or air conditioning system modifications or replacements;
    (5) replacement or modifications of lighting fixtures to increase the energy efficiency
of the lighting system without increasing the overall illumination of a facility, unless an
increase in illumination is necessary to conform to the applicable state or local building
code for the lighting system after the proposed modifications are made;
    (6) energy recovery systems;
    (7) cogeneration systems that produce steam or forms of energy such as heat, as well
as electricity, for use primarily within a building or complex of buildings;
    (8) energy conservation measures that provide long-term operating cost reductions.
    (b) "Guaranteed energy savings contract" means a contract for the evaluation
and recommendations of energy conservation measures, and for one or more energy
conservation measures. The contract must provide that all payments, except obligations
on termination of the contract before its expiration, are to be made over time, but not to
exceed 15 years from the date of final installation, and the savings are guaranteed to the
extent necessary to make payments for the systems.
    (c) "Qualified provider" means a person or business experienced in the design,
implementation, and installation of energy conservation measures. A qualified provider
to whom the contract is awarded shall give a sufficient bond to the municipality for its
faithful performance.
    Notwithstanding any law to the contrary, a municipality may enter into a guaranteed
energy savings contract with a qualified provider to significantly reduce energy or
operating costs.
    Before entering into a contract under this subdivision, the municipality shall provide
published notice of the meeting in which it proposes to award the contract, the names of
the parties to the proposed contract, and the contract's purpose.
    Before installation of equipment, modification, or remodeling, the qualified provider
shall first issue a report, summarizing estimates of all costs of installations, modifications,
or remodeling, including costs of design, engineering, installation, maintenance, repairs,
or debt service, and estimates of the amounts by which energy or operating costs will be
reduced.
    A guaranteed energy savings contract that includes a written guarantee that savings
will meet or exceed the cost of energy conservation measures is not subject to competitive
bidding requirements of section 471.345 or other law or city charter. The contract is
not subject to section 123B.52.
    A municipality may enter into a guaranteed energy savings contract with a qualified
provider if, after review of the report, it finds that the amount it would spend on the energy
conservation measures recommended in the report is not likely to exceed the amount
to be saved in energy and operation costs over 15 years from the date of installation if
the recommendations in the report were followed, and the qualified provider provides a
written guarantee that the energy or operating cost savings will meet or exceed the costs
of the system. The guaranteed energy savings contract may provide for payments over
a period of time, not to exceed 15 years.
    A municipality may enter into an installment payment contract for the purchase and
installation of energy conservation measures. The contract must provide for payments
of not less than 1/15 of the price to be paid within two years from the date of the first
operation, and the remaining costs to be paid monthly, not to exceed a 15-year term from
the date of the first operation.
    A municipality entering into a guaranteed energy savings contract shall provide a
copy of the contract and the report from the qualified provider to the commissioner of
commerce within 30 days of the effective date of the contract.
    Guaranteed energy savings contracts may extend beyond the fiscal year in which
they become effective. The municipality shall include in its annual appropriations measure
for each later fiscal year any amounts payable under guaranteed energy savings contracts
during the year. Failure of a municipality to make such an appropriation does not affect
the validity of the guaranteed energy savings contract or the municipality's obligations
under the contracts.

    Sec. 5. Minnesota Statutes 2006, section 504B.161, subdivision 1, is amended to read:
    Subdivision 1. Requirements. (a) In every lease or license of residential premises,
the landlord or licensor covenants:
    (1) that the premises and all common areas are fit for the use intended by the parties;
    (2) to keep the premises in reasonable repair during the term of the lease or license,
except when the disrepair has been caused by the willful, malicious, or irresponsible
conduct of the tenant or licensee or a person under the direction or control of the tenant or
licensee; and
    (3) to make the premises reasonably energy efficient by installing weatherstripping,
caulking, storm windows, and storm doors when any such measure will result in energy
procurement cost savings, based on current and projected average residential energy costs
in Minnesota, that will exceed the cost of implementing that measure, including interest,
amortized over the ten-year period following the incurring of the cost; and
    (4) to maintain the premises in compliance with the applicable health and safety
laws of the state, including the weatherstripping, caulking, storm window, and storm door
energy efficiency standards for renter-occupied residences prescribed by section 216C.27,
subdivisions 1 and 3
, and of the local units of government where the premises are located
during the term of the lease or license, except when violation of the health and safety
laws has been caused by the willful, malicious, or irresponsible conduct of the tenant or
licensee or a person under the direction or control of the tenant or licensee.
    (b) The parties to a lease or license of residential premises may not waive or modify
the covenants imposed by this section.

    Sec. 6. NUCLEAR ENERGY STUDY.
    The legislative electric energy task force shall conduct an analysis of the economic
and environmental costs of constructing a 600-megawatt nuclear-powered electric
generating plant in Minnesota. The analysis must include predesign, design and
construction costs, and waste storage costs. The study must compare these costs with
the costs of constructing a pulverized coal plant with carbon capture and sequestration
technology and a coal-gasification plant with carbon capture and sequestration technology.
The study's findings must be submitted in a report to the chairs and ranking minority
members of the committees of the house of representatives and senate with primary
jurisdiction over energy policy by March 1, 2008.

    Sec. 7. REPEALER.
Minnesota Statutes 2006, sections 216B.165; 216C.27; and 216C.30, subdivision 5,
and Minnesota Rules, parts 7635.0100; 7635.0110; 7635.0120; 7635.0130; 7635.0140;
7635.0150; 7635.0160; 7635.0170; 7635.0180; 7635.0200; 7635.0210; 7635.0220;
7635.0230; 7635.0240; 7635.0250; 7635.0260; 7635.0300; 7635.0310; 7635.0320;
7635.0330; 7635.0340; 7635.0400; 7635.0410; 7635.0420; 7635.0500; 7635.0510;
7635.0520; 7635.0530; 7635.0600; 7635.0610; 7635.0620; 7635.0630; 7635.0640;
7635.1000; 7635.1010; 7635.1020; 7635.1030; 7655.0100; 7655.0120; 7655.0200;
7655.0210; 7655.0220; 7655.0230; 7655.0240; 7655.0250; 7655.0260; 7655.0270;
7655.0280; 7655.0290; 7655.0300; 7655.0310; 7655.0320; 7655.0330; 7655.0400;
7655.0410; and 7655.0420, are repealed, effective July 1, 2007.

    Sec. 8. EFFECTIVE DATE.
    This article is effective July 1, 2007.

ARTICLE 4
C-BED AND RELATED ISSUES

    Section 1. Minnesota Statutes 2006, section 216B.1612, subdivision 1, is amended to
read:
    Subdivision 1. Tariff establishment. A tariff shall be established to optimize local,
regional, and state benefits from wind renewable energy development and to facilitate
widespread development of community-based wind renewable energy projects throughout
Minnesota.

    Sec. 2. Minnesota Statutes 2006, section 216B.1612, subdivision 2, is amended to read:
    Subd. 2. Definitions. (a) The terms used in this section have the meanings given
them in this subdivision.
    (b) "C-BED tariff" or "tariff" means a community-based energy development tariff.
    (c) "Qualifying owner" means:
    (1) a Minnesota resident;
    (2) a limited liability company that is organized under the laws of this state chapter
322B and that is made up of members who are Minnesota residents;
    (3) a Minnesota nonprofit organization organized under chapter 317A;
    (4) a Minnesota cooperative association organized under chapter 308A or 308B,
other than including a rural electric cooperative association or a generation and
transmission cooperative on behalf of and at the request of a member distribution utility;
    (5) a Minnesota political subdivision or local government other than including,
but not limited to, a municipal electric utility, or a municipal power agency on behalf
of and at the request of a member distribution utility, including, but not limited to, a
county, statutory or home rule charter city, town, school district, or public or private
higher education institution or any other local or regional governmental organization such
as a board, commission, or association; or
    (6) a tribal council.
    (d) "Net present value rate" means a rate equal to the net present value of the
nominal payments to a project divided by the total expected energy production of the
project over the life of its power purchase agreement.
    (e) "Standard reliability criteria" means:
    (1) can be safely integrated into and operated within the utility's grid without causing
any adverse or unsafe consequences; and
    (2) is consistent with the utility's resource needs as identified in its most recent
resource plan submitted under section 216B.2422.
    (f) "Renewable" refers to a technology listed in section 216B.1691, subdivision 1,
paragraph (a).
     (g) "Community-based energy development project" or "C-BED project" means
a new wind renewable energy project that either as a stand-alone project or part of a
partnership under subdivision 8:
    (1) has no single qualifying owner owning more than 15 percent of a C-BED wind
energy project that consists of more than two turbines; or unless: (i) the C-BED wind
energy project consists of only one or two turbines; or (ii) the qualifying owner is a public
entity listed under paragraph (b), clause (5), that is not a municipal utility;
    (2) for C-BED projects of one or two turbines, is owned entirely by one or more
qualifying owners, with demonstrates that at least 51 percent of the total financial benefits
gross revenues from a power purchase agreement over the life of the project flowing
will flow to qualifying owners and other local entities; and
    (3) has a resolution of support adopted by the county board of each county in which
the project is to be located, or in the case of a project located within the boundaries of a
reservation, the tribal council for that reservation.
EFFECTIVE DATE.This section is effective the day following final enactment.

    Sec. 3. Minnesota Statutes 2006, section 216B.1612, subdivision 3, is amended to read:
    Subd. 3. Tariff rate. (a) The tariff described in subdivision 4 must have a rate
schedule that allows for a rate up to a 2.7 cents per kilowatt-hour net present value rate
over the 20-year life of the power purchase agreement. The tariff must provide for a rate
that is higher in the first ten years of the power purchase agreement than in the last ten
years. The discount rate required to calculate the net present value must be the utility's
normal discount rate used for its other business purposes.
    (b) The commission shall consider mechanisms to encourage the aggregation
of C-BED projects.
    (c) The commission shall require that qualifying and nonqualifying owners provide
sufficient security to secure performance under the power purchase agreement, and shall
prohibit the transfer of the C-BED project to a nonqualifying owner during the initial
20 years of the contract.
EFFECTIVE DATE.This section is effective the day following final enactment.

    Sec. 4. Minnesota Statutes 2006, section 216B.1612, subdivision 4, is amended to read:
    Subd. 4. Utilities to offer tariff. By December 1, 2005 2007, each public utility
providing electric service at retail shall file for commission approval a community-based
energy development tariff consistent with subdivision 3. Within 90 days of the
first commission approval order under this subdivision, each municipal power
agency and generation and transmission cooperative electric association shall adopt a
community-based energy development tariff as consistent as possible with subdivision 3.
EFFECTIVE DATE.This section is effective the day following final enactment.

    Sec. 5. Minnesota Statutes 2006, section 216B.1612, subdivision 5, is amended to read:
    Subd. 5. Priority for C-BED projects. (a) A utility subject to section 216B.1691
that needs to construct new generation, or purchase the output from new generation, as
part of its plan to satisfy its good faith objective and standard under that section should
must take reasonable steps to determine if one or more C-BED projects are available that
meet the utility's cost and reliability requirements, applying standard reliability criteria, to
fulfill some or all of the identified need at minimal impact to customer rates.
Nothing in this section shall be construed to obligate a utility to enter into a power
purchase agreement under a C-BED tariff developed under this section.
    (b) Each utility shall include in its resource plan submitted under section 216B.2422
a description of its efforts to purchase energy from C-BED projects, including a list of the
projects under contract and the amount of C-BED energy purchased.
    (c) The commission shall consider the efforts and activities of a utility to purchase
energy from C-BED projects when evaluating its good faith effort towards meeting the
renewable energy objective under section 216B.1691.
    (d) A municipal power agency or generation and transmission cooperative shall,
when issuing a request for proposals for C-BED projects to satisfy its standard obligation
under section 216B.1691, provide notice to its member distribution utilities that they
may propose, in partnership with other qualifying owners, a C-BED project for the
consideration of the municipal power agency or generation and transmission cooperative.
EFFECTIVE DATE.This section is effective the day following final enactment.

    Sec. 6. Minnesota Statutes 2006, section 216B.1612, subdivision 7, is amended to read:
    Subd. 7. Other C-BED tariff issues. (a) A community-based project developer
and a utility shall negotiate the rate and power purchase agreement terms consistent with
the tariff established under subdivision 4.
    (b) At the discretion of the developer, a community-based project developer and
a utility may negotiate a power purchase agreement with terms different from the tariff
established under subdivision 4.
    (c) A qualifying owner, or any combination of qualifying owners, may develop a
joint venture project with a nonqualifying wind renewable energy project developer.
However, the terms of the C-BED tariff may only apply to the portion of the energy
production of the total project that is directly proportional to the equity share of the project
owned by the qualifying owners.
    (d) A project that is operating under a power purchase agreement under a C-BED
tariff is not eligible for net energy billing under section 216B.164, subdivision 3, or for
production incentives under section 216C.41.
    (e) A public utility must receive commission approval of a power purchase
agreement for a C-BED tariffed project. The commission shall provide the utility's
ratepayers an opportunity to address the reasonableness of the proposed power purchase
agreement. Unless a party objects to a contract within 30 days of submission of the
contract to the commission the contract is deemed approved.
EFFECTIVE DATE.This section is effective the day following final enactment.

    Sec. 7. Minnesota Statutes 2006, section 216B.1612, is amended by adding a
subdivision to read:
    Subd. 8. Community energy partnerships. A utility providing electric service
to retail or wholesale customers in Minnesota and an independent power producer may,
subject to the limits specified in this section, participate in a community-based energy
project, including as an owner, equity partner, or provider of technical or financial
assistance.
EFFECTIVE DATE.This section is effective the day following final enactment.

    Sec. 8. Minnesota Statutes 2006, section 216B.1645, is amended by adding a
subdivision to read:
    Subd. 2a. Cost recovery for owned renewable facilities. (a) A utility may petition
the commission to approve a rate schedule that provides for the automatic adjustment of
charges to recover prudently incurred investments, expenses, or costs associated with
facilities constructed, owned, or operated by a utility to satisfy the requirements of section
216B.1691, provided those facilities were previously approved by the commission under
section 216B.2422 or 216B.243. The commission may approve, or approve as modified, a
rate schedule that:
    (1) allows a utility to recover directly from customers on a timely basis the costs of
qualifying renewable energy projects, including:
    (i) return on investment;
    (ii) depreciation;
    (iii) ongoing operation and maintenance costs;
    (iv) taxes; and
    (v) costs of transmission and other ancillary expenses directly allocable to
transmitting electricity generated from a project meeting the specifications of this
paragraph;
    (2) provides a current return on construction work in progress, provided that recovery
of these costs from Minnesota ratepayers is not sought through any other mechanism;
    (3) allows recovery of other expenses incurred that are directly related to a renewable
energy project, provided that the utility demonstrates to the commission's satisfaction that
the expenses improve project economics, ensure project implementation, or facilitate
coordination with the development of transmission necessary to transport energy produced
by the project to market;
    (4) allocates recoverable costs appropriately between wholesale and retail customers;
    (5) terminates recovery when costs have been fully recovered or have otherwise
been reflected in a utility's rates.
    (b) A petition filed under this subdivision must include:
    (1) a description of the facilities for which costs are to be recovered;
    (2) an implementation schedule for the facilities;
    (3) the utility's costs for the facilities;
    (4) a description of the utility's efforts to ensure that costs of the facilities are
reasonable and were prudently incurred; and
    (5) a description of the benefits of the project in promoting the development of
renewable energy in a manner consistent with this chapter.

    Sec. 9. [216B.1681] CURTAILMENT PAYMENTS.
    The commission shall conduct a study of curtailment payments for wind energy
projects to assess whether utilities are unduly discriminating among project ownership
structures in regard to the contractual availability of curtailment payments. The
commission shall submit the study to the chairs and ranking minority members of the
senate and house of representatives committees with primary jurisdiction over energy
policy by January 15, 2008.

    Sec. 10. Minnesota Statutes 2006, section 216B.1691, is amended by adding a
subdivision to read:
    Subd. 7. Utility acquisition of resources. A competitive resource acquisition
process established by the commission prior to June 1, 2007, shall not apply to a utility
for the construction, ownership, and operation of generation facilities used to satisfy the
requirements of this section unless, upon a finding that it is in the public interest, the
commission issues an order on or after June 1, 2007, that requires compliance by a utility
with a competitive resource acquisition process. A utility that owns a nuclear generation
facility and intends to construct, own, or operate facilities under this section shall file with
the commission on or before March 1, 2008, a renewable energy plan setting forth the
manner in which the utility proposes to meet the requirements of this section, including
a proposed schedule for purchasing renewable energy from C-BED and non-C-BED
projects. The utility shall update the plan as necessary in its filing under section
216B.2422. The commission shall approve the plan unless it determines, after public
hearing and comment, that the plan is not in the public interest. As part of its determination
of public interest, the commission shall consider the plan's allocation of projects among
C-BED, non-C-BED, and utility-owned projects, balancing the state's interest in:
    (1) promoting the policy of economic development in rural areas through the
development of renewable energy projects, as expressed in subdivision 9;
    (2) maintaining the reliability of the state's electric power grid; and
    (3) minimizing cost impacts on ratepayers.

    Sec. 11. Minnesota Statutes 2006, section 216C.052, is amended to read:
216C.052 RELIABILITY ADMINISTRATOR.
    Subdivision 1. Responsibilities. (a) There is established the position of reliability
administrator in the Public Utilities Commission Department of Commerce. The
administrator shall act as a source of independent expertise and a technical advisor to
the commissioner, the commission and the public on issues related to the reliability of
the electric system. In conducting its work, the administrator shall provide assistance
to the commission commissioner in administering and implementing the commission's
department's duties under sections 216B.1612, 216B.1691, 216B.2422, 216B.2425, and
216B.243; chapters 216E, 216F, and 216G; and rules associated with those provisions.
Subject to resource constraints, the reliability administrator may also and shall also:
    (1) model and monitor the use and operation of the energy infrastructure in the
state, including generation facilities, transmission lines, natural gas pipelines, and other
energy infrastructure;
    (2) develop and present to the commission and parties technical analyses of proposed
infrastructure projects, and provide technical advice to the commission;
    (3) present independent, factual, expert, and technical information on infrastructure
proposals and reliability issues at public meetings hosted by the task force, the
Environmental Quality Board, the department, or the commission.
    (b) Upon request and subject to resource constraints, the administrator shall
provide technical assistance regarding matters unrelated to applications for infrastructure
improvements to the task force, the department, or the commission.
    (c) The administrator may not advocate for any particular outcome in a commission
proceeding, but may give technical advice to the commission as to the impact on the
reliability of the energy system of a particular project or projects.
    Subd. 2. Administrative issues. (a) The commission commissioner may select the
administrator who shall serve for a four-year term. The administrator must have at least
five years of experience working as a power systems engineer or transmission planner, or
in a position dealing with power system reliability issues, and may not have been a party
or a participant in a commission energy proceeding for at least one year prior to selection
by the commission commissioner. The commission 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. Pursuant to commission approval,
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 commission Department of Commerce shall pay:
    (1) the general administrative costs of the administrator, not to exceed $1,000,000 in
a fiscal year, and shall assess energy utilities for those administrative costs. These costs
must be consistent with the budget approved by the commission commissioner under
paragraph (a). The commission 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 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 commission 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 commission
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 commission department 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.
    Subd. 3. Assessment and appropriation. In addition to the amount noted in
subdivision 2, the commission commissioner may assess utilities, using the mechanism
specified in that subdivision, up to an additional $500,000 annually through June 30,
2008. The amounts assessed under this subdivision are appropriated to the commission
commissioner, and some or all of the amounts assessed may be transferred to the
commissioner of administration, for the purposes specified in section 16B.325 and Laws
2001, chapter 212, article 1, section 3, as needed to implement those sections.
    Subd. 4. Expiration. Subdivisions 1 and 2 expire June 30, 2007 2012. Subdivision
3 expires June 30, 2008.

    Sec. 12. [216F.011] SIZE DETERMINATION.
    (a) The total size of a combination of wind energy conversion systems for the
purpose of determining what jurisdiction has siting authority under this chapter must
be determined according to this section. The nameplate capacity of one wind energy
conversion system must be combined with the nameplate capacity of any other wind
energy conversion system that:
    (1) is located within five miles of the wind energy conversion system;
    (2) is constructed within the same 12-month period as the wind energy conversion
system; and
    (3) exhibits characteristics of being a single development, including, but not limited
to, ownership structure, an umbrella sales arrangement, shared interconnection, revenue
sharing arrangements, and common debt or equity financing.
    (b) The commissioner shall provide forms and assistance for project developers to
make a request for a size determination. Upon written request of a project developer, the
commissioner of commerce shall provide a written size determination within 30 days
of receipt of the request and of any information requested by the commissioner. In the
case of a dispute, the chair of the Public Utilities Commission shall make the final size
determination.
    (c) An application to a county for a permit under this chapter for a wind energy
conversion system is not complete without a size determination made under this section.
EFFECTIVE DATE.This section is effective January 15, 2008.

    Sec. 13. [216F.08] PERMIT AUTHORITY; ASSUMPTION BY COUNTIES.
    (a) A county board may, by resolution and upon written notice to the Public Utilities
Commission, assume responsibility for processing applications for permits required
under this chapter for LWECS with a combined nameplate capacity of less than 25,000
kilowatts. The responsibility for permit application processing, if assumed by a county,
may be delegated by the county board to an appropriate county officer or employee.
Processing by a county shall be done in accordance with procedures and processes
established under chapter 394.
    (b) A county board that exercises its option under paragraph (a) may issue, deny,
modify, impose conditions upon, or revoke permits pursuant to this section. The action
of the county board about a permit application is final, subject to appeal as provided
in section 394.27.
    (c) The commission shall, by order, establish general permit standards, including
appropriate property line set-backs, governing site permits for LWECS under this section.
The order must consider existing and historic commission standards for wind permits
issued by the commission. The general permit standards shall apply to permits issued by
counties and to permits issued by the commission for LWECS with a combined nameplate
capacity of less than 25,000 kilowatts. The commission or a county may grant a variance
from a general permit standard if the variance is found to be in the public interest.
    (d) The commission and the commissioner of commerce shall provide technical
assistance to a county with respect to the processing of LWECS site permit applications.
EFFECTIVE DATE.This section is effective January 15, 2008.

    Sec. 14. [216F.081] APPLICATION OF COUNTY STANDARDS.
    A county may adopt by ordinance standards for LWECS that are more stringent than
standards in commission rules or in the commission's permit standards. The commission,
in considering a permit application for LWECS in a county that has adopted more stringent
standards, shall consider and apply those more stringent standards, unless the commission
finds good cause not to apply the standards.

    Sec. 15. Minnesota Statutes 2006, section 500.30, subdivision 2, is amended to read:
    Subd. 2. Like any conveyance. Any property owner may grant a solar or wind
easement in the same manner and with the same effect as a conveyance of an interest in
real property. The easements shall be created in writing and shall be filed, duly recorded,
and indexed in the office of the recorder of the county in which the easement is granted.
No duly recorded easement shall be unenforceable on account of lack of privity of estate
or privity of contract; such easements shall run with the land or lands benefited and
burdened and shall constitute a perpetual easement, except that an easement may terminate
upon the conditions stated therein or pursuant to the provisions of section 500.20. A wind
easement, easement to install wind turbines on real property, option, or lease of wind
rights shall also terminate after seven years from the date the easement is created or lease
is entered into, if a wind energy project on the property to which the easement or lease
applies does not begin commercial operation within the seven-year period.
EFFECTIVE DATE.This section is effective the day following final enactment,
and applies to wind easements created and wind rights leases entered into on and after
the effective date of this section.

    Sec. 16. RESOURCE ASSESSMENT.
    The reliability administrator shall conduct an engineering assessment of Minnesota's
electricity resource needs through 2025, with a focus on baseload resources. The
reliability administrator may contract with an independent entity to conduct all or part of
the study. The assessment must consider additional generation and transmission resources
necessary to meet the state's renewable energy standard under Laws 2007, chapter 3,
section 1, subdivision 2a, and projected energy savings resulting from the implementation
of article 2. The assessment, among other activities, must review and evaluate the most
recent Minnesota utility demand forecasts, integrated resource plans filed under section
216B.2422, and transmission projects reports filed under section 216B.2425, including
the assumptions underlying them, and provide independent projections of demand and
baseload and nonbaseload generation and transmission resources available to meet
projected demand in 2010, 2015, 2020, and 2025. The reliability administrator shall
manage the assessment process and shall appoint a technical review committee to review
the assessment's proposed methods, assumptions, and preliminary data and results. The
reliability administrator must submit a report on the assessment to the chairs and ranking
minority members of the senate and house of representatives committees with primary
jurisdiction over energy policy. The cost of the assessment is recoverable under section
216C.052, subdivision 2.

    Sec. 17. STATEWIDE STUDY OF DISPERSED GENERATION POTENTIAL.
    Subdivision 1. Definition. "Dispersed generation" means an electric generation
project with a generating capacity between ten and 40 megawatts that utilizes an "eligible
energy technology," as defined in Minnesota Statutes, section 216B.1691, subdivision 1,
paragraph (a).
    Subd. 2. Study participants. Each electric utility subject to Minnesota Statutes,
section 216B.1691, must participate collaboratively in conducting a two-phase study of
the potential for dispersed generation projects that can be developed in Minnesota.
    Subd. 3. First phase study content; report. In the first phase of the study,
participants must analyze the impacts of the addition of a total of 600 megawatts of
new dispersed generation projects distributed among the following Minnesota electric
transmission planning zones: the Northeast zone, the Northwest zone, the Southeast
zone, the Southwest zone, and the West-Central zone. Study participants must use a
generally accepted 2010 year transmission system model including all transmission
facilities expected to be operating in 2010. The study must take into consideration
regional projected load growth, planned changes in the bulk transmission network, and the
long-range transmission conceptual plan being developed under Laws 2007, chapter 3,
section 2. In determining locations for the installation of dispersed generation projects
that consist of wind energy conversion systems, the study should consider, at a minimum,
wind resource availability, existing and contracted wind projects, and current dispersed
generation projects in the Midwest Independent System Operator interconnection queue.
The study must analyze the impacts of individual projects and all projects in aggregate on
the transmission system, and identify specific modifications to the transmission system
necessary to remedy any problems caused by the installation of dispersed generation
projects, including cost estimates for the modifications. The study must analyze the
additional dispersed generation projects connected at the lowest voltage level transmission
that exists in the vicinity of the projected generation sites. A preliminary analysis to
identify transmission system problems must be conducted with the projects installed at
initially selected locations. The technical review committee may, after reviewing the
locations selected for installation, recommend moving the installation sites once to new
locations to reduce undesirable transmission system impacts. The commissioner of
commerce must submit a report containing the findings and recommendations of the first
phase of the study to the commission no later than June 15, 2008.
    Subd. 4. Second phase study content; report. In the second phase of the study,
participants must analyze the impacts of an additional total of 600 megawatts of dispersed
generation projects installed among the five transmission planning zones, or a higher total
capacity amount if agreed to by both the utilities and the technical review committee. The
utilities must employ an analysis method similar to that used in the first phase of the study,
and must use the most recent information available, including information developed in
the first phase. The second phase of the study must use a generally accepted 2013 year
transmission system model including all transmission facilities that are expected to be
in service at that time. The commissioner of commerce must submit a report containing
the findings and recommendations of the second phase of the study to the commission no
later than September 15, 2009.
    Subd. 5. Technical review committee. Prior to the start of the first phase of
the study, the commissioner of commerce must appoint a technical review committee
consisting of between ten and 15 individuals with experience and expertise in electric
transmission system engineering, renewable energy generation technology, and dispersed
generation project development, including representatives from the federal Department
of Energy, the Midwest Independent System Operator, and stakeholder interests. The
technical review committee must oversee both phases of the study, and must:
    (1) make recommendations to the utilities regarding the proposed methods and
assumptions to be used in the technical study;
    (2) in conjunction with the appropriate utilities, hold public meetings on each
phase of the study in each electricity transmission planning zone prior to the beginning
of each phase of study, after the impact analysis is completed, and when a draft final
report is available;
    (3) establish procedures for handling commercially sensitive information; and
    (4) review the initial and final drafts of the study and make recommendations for
improvement, including problems associated with the interconnections among utility
systems that may be amenable to solution through cooperation between the utilities in each
zone. During each phase of the study, the technical review committee may recommend
that the installation of dispersed generation projects be moved to new locations that cause
fewer undesirable transmission system impacts.
EFFECTIVE DATE.This section is effective the day following final enactment.

    Sec. 18. WIND DEVELOPMENT PROPERTY AGREEMENTS; STUDY.
    The Legislative Electric Energy Task Force shall study whether the state should
regulate easements, leases, and other agreements to acquire an interest in real property
for the purpose of wind energy development. The purpose of the study is to determine
whether the duration and other terms of those interests should be limited to promote
wind energy development. The task force must report the results of its study and any
recommendations to the chairs of the energy finance and policy committees of the
legislature by February 1, 2008.
EFFECTIVE DATE.This section is effective the day following final enactment.

    Sec. 19. C-BED ADVISORY TASK FORCE.
    Subdivision 1. Members. The Legislative Electric Energy Task Force shall oversee
and appoint an advisory task force on community-based energy development (C-BED)
under Minnesota Statutes, section 15.059, subdivision 6, consisting of representatives
of the Department of Commerce, the Public Utilities Commission, public utilities,
independent power producers, municipal utilities, rural cooperatives, landowners currently
engaged in C-BED and non-C-BED wind development projects, advocacy organizations
for wind developers, and environmental organizations, as well as wind energy experts,
tribal representatives, and clean energy advocates.
    Subd. 2. Issues. The task force shall study and make recommendations to the chairs
and ranking minority members of the senate and house of representatives committees
with primary jurisdiction over energy policy in a report submitted by January 15, 2008,
on the following issues:
    (1) the definition of a C-BED qualifying owner;
    (2) the definition of gross revenues with respect to community benefits;
    (3) the ability of Minnesota and non-Minnesota financial institutions to provide
capital;
    (4) compliance and enforcement;
    (5) wind easements;
    (6) feed-in tariffs for community energy;
    (7) community energy models/project structure;
    (8) credits toward utility renewable energy standard requirements for utility
participation;
    (9) utility compensation for additional work for community ownership projects;
    (10) types of incentives, compensation, and encouragement for utility participation;
and
    (11) other topics related to and impacting the C-BED program, as determined by
the task force.
    Subd. 3. Expiration. This section, and the advisory task force on community-based
energy development, expires January 16, 2008.
EFFECTIVE DATE.This section is effective the day following final enactment.

    Sec. 20. TRANSFERRING RELIABILITY ADMINISTRATOR
RESPONSIBILITIES.
    All responsibilities, as defined in Minnesota Statutes, section 15.039, subdivision
1, held by the Public Utilities Commission relating to the reliability administrator under
Minnesota Statutes, section 216C.052, are transferred to the Minnesota Department of
Commerce under Minnesota Statutes, section 15.039.

    Sec. 21. TRANSMISSION AUTHORITY AND INTERCONNECTION
EVALUATIONS.
    The reliability administrator shall, in consultation with interested stakeholders:
    (1) review the structures, powers, and duties for constructing, owning, maintaining,
and operating transmission facilities of state transmission authorities established in
Kansas, North Dakota, South Dakota, and Wyoming, and evaluate whether the existence
of a similar organization in Minnesota would have the potential to increase the reliability
and efficiency of the electrical grid in the state; hasten the development of needed
transmission lines; accelerate the development of renewable energy projects, especially in
rural areas of the state; and reduce delivered energy costs to Minnesota ratepayers; and
    (2) assess the potential for and barriers to interconnecting dispersed generation
projects to locations on the electric grid where a generator interconnection would not be
subject to the interconnection rules of the Federal Energy Regulatory Commission or the
Midwest Independent System Operator.
No technical or engineering analyses are necessary in order to complete these duties. The
reliability administrator must report its findings and any recommendations to the chairs of
the senate and house of representatives committees with jurisdiction over energy policy by
February 15, 2008.

ARTICLE 5
GLOBAL CLIMATE CHANGE; GREENHOUSE GAS EMISSIONS

    Section 1. [216H.01] DEFINITIONS.
    Subdivision 1. Scope. For the purpose of this chapter, the terms defined in this
section have the meanings given them.
    Subd. 2. Statewide greenhouse gas emissions. "Statewide greenhouse
gas emissions" include emissions of carbon dioxide, methane, nitrous oxide,
hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride emitted by anthropogenic
sources within the state and from the generation of electricity imported from outside
the state and consumed in Minnesota. Carbon dioxide that is injected into geological
formations to prevent its release to the atmosphere in compliance with applicable laws,
and carbon dioxide associated with the combustion of fuels other than coal, petroleum,
and natural gas are not counted as contributing to statewide greenhouse gas emissions.

    Sec. 2. [216H.02] GREENHOUSE GAS EMISSIONS CONTROL.
    Subdivision 1. Greenhouse gas emissions reduction goal. It is the goal of the state
to reduce statewide greenhouse gas emissions across all sectors producing those emissions
to a level at least 15 percent below 2005 levels by 2015, to a level at least 30 percent
below 2005 levels by 2025, and to a level at least 80 percent below 2005 levels by 2050.
The levels shall be reviewed based on the climate change action plan study.
    Subd. 2. Climate change action plan. By February 1, 2008, the commissioner of
commerce, in consultation with the commissioners of the Pollution Control Agency,
the Housing Finance Agency, and the Departments of Natural Resources, Agriculture,
Employment and Economic Development, and Transportation, and the chair of the
Metropolitan Council, shall submit to the legislature a climate change action plan that
meets the requirements of this section.
    Subd. 3. Stakeholder process. The plan required by subdivision 2 must be
developed through a structured, broadly inclusive stakeholder-based review of potential
policies and initiatives that will reduce statewide greenhouse gas emissions from a
broad range of sources and activities. The commissioner shall engage a nationally
recognized independent expert entity to conduct the stakeholder process. The report of
the stakeholder process must form the basis for the plan submitted by the commissioner
under subdivision 2.
    Subd. 4. General elements of the plan. The plan must:
    (1) estimate 1990 and 2005 greenhouse gas emissions in the state and make
projections of emissions in 2015, 2025, and 2050;
    (2) identify, evaluate, and integrate a broad range of statewide greenhouse gas
reduction options for all emission sectors in the state;
    (3) assess the costs, benefits, and feasibility of implementing the options;
    (4) recommend an integrated set of reduction options and strategies for implementing
the options that will achieve the goals in subdivision 1, including analysis of the associated
costs and benefits to Minnesotans;
    (5) estimate the statewide greenhouse gas emissions reductions anticipated from
implementation of existing state policies;
    (6) recommend a system to require the reporting of statewide greenhouse gas
emissions, identifying which facilities must report, and how emission estimates should
be made; and
    (7) evaluate the option of exempting a project from the prohibitions contained in
section 216H.03, subdivision 3, if the project contributes a specified fee per ton of carbon
dioxide emissions emitted annually by the project, the proceeds of which would be used to
fund permanent, quantifiable, verifiable, and enforceable reductions in greenhouse gas
emissions that would not otherwise have occurred.
    Subd. 5. Specific plan requirements. (a) The plan must evaluate and recommend
interim goals as steps to achieve the goals in subdivision 1.
    (b) The plan must determine the feasibility, assess the costs and benefits, and
recommend how the state could adopt a regulatory system that imposes a cap on the
aggregate air pollutant emissions of a group of sources, requires those subject to the
cap to own an allowance for each ton of the air pollutant emitted, and allows for
market-based trading of those allowances. The evaluation must contain an analysis of the
state implementing a cap and trade system alone, in coordination with other states, and
as a requirement of federal law applying to all states. The plan must recommend the
parameters of a cap and trade system that includes a cap that would prevent significant
increases in greenhouse gas emissions above current levels with a schedule for lowering
the cap periodically to achieve the goals in subdivision 1 and interim goals recommended
under paragraph (a). The plan must consider cost savings and cost increases on energy
consumers in the state.
    (c) The plan must include recommendations for improvements in the emissions
inventory and recommend whether the state should require greenhouse gas emissions
reporting from specific sources and, if so, which sources should be required to report. The
plan must also evaluate options for an emissions registry after reviewing registries in other
states and recommend a registry that will insure the greatest opportunity for Minnesota
entities to obtain marketable credits.
    Subd. 6. Regional activities. The state must, to the extent possible, with other states
in the Midwest region, develop and implement a regional approach to reducing greenhouse
gas emissions from activities in the region, including consulting on a regional cap and
trade system. The commissioner of commerce shall coordinate Minnesota's regional
activities under this subdivision and report to the legislative committees in the senate
and house of representatives with jurisdiction over energy and environmental policy by
February 1, 2008, and February 1, 2009, on the progress made and recommendations for
further action. The commissioner of commerce, as part of the activities required under this
subdivision, must meet with responsible officials from bordering states, other states in the
Midwest region, and states in other regions of the country to: (1) determine whether other
states are interested in establishing and cooperating in a multistate or regional greenhouse
gas cap and trade allowance program; (2) identify and prepare an inventory of greenhouse
gas reduction resources available to support a multistate or regional greenhouse gas cap
and trade allowance program; (3) seek cooperation on a regional inventory of greenhouse
gas emission sources; and (4) prepare an inventory of available renewable energy
resources within a state or region. The commissioner of commerce must develop a
definition of scope of this regional activity that is in addition to the components described
in clauses (1) to (4). The commissioner must report on the additional scoping definitions
to the chairs and ranking minority members of the legislative committees with jurisdiction
over energy and environmental finance and policy on or before the commencement of the
2008 regular legislative session.

    Sec. 3. [216H.03] FAILURE TO ADOPT GREENHOUSE GAS CONTROL
PLAN.
    Subdivision 1. Definition; new large energy facility. For the purpose of this
section, "new large energy facility" means a large energy facility, as defined in section
216B.2421, subdivision 2, clause (1), that is not in operation as of January 1, 2007, but
does not include a facility that (1) uses natural gas as a primary fuel, (2) is designed to
provide peaking, intermediate, emergency backup, or contingency services, (3) uses a
simple cycle or combined cycle turbine technology, and (4) is capable of achieving full
load operations within 45 minutes of startup for a simple cycle facility, or is capable
of achieving minimum load operations within 185 minutes of startup for a combined
cycle facility.
    Subd. 2. Definition; statewide power sector carbon dioxide emissions. For the
purpose of this section, "statewide power sector carbon dioxide emissions" means the total
annual emissions of carbon dioxide from the generation of electricity within the state
and all emissions of carbon dioxide from the generation of electricity imported from
outside the state and consumed in Minnesota. Emissions of carbon dioxide associated
with transmission and distribution line losses are included in this definition. Carbon
dioxide that is injected into geological formations to prevent its release to the atmosphere
in compliance with applicable laws, and emissions of carbon dioxide associated with
the combustion of biomass, as defined in section 216B.2411, subdivision 2, paragraph
(c), clauses (1) to (4), are not counted as contributing to statewide power sector carbon
dioxide emissions.
    Subd. 3. Long-term increased emissions from power plants prohibited. Unless
preempted by federal law, until a comprehensive and enforceable state law or rule
pertaining to greenhouse gases that directly limits and substantially reduces, over time,
statewide power sector carbon dioxide emissions is enacted and in effect, and except as
allowed in subdivisions 4 to 7, on and after August 1, 2009, no person shall:
    (1) construct within the state a new large energy facility that would contribute to
statewide power sector carbon dioxide emissions;
    (2) import or commit to import from outside the state power from a new large energy
facility that would contribute to statewide power sector carbon dioxide emissions; or
    (3) enter into a new long-term power purchase agreement that would increase
statewide power sector carbon dioxide emissions. For purposes of this section, a long-term
power purchase agreement means an agreement to purchase 50 megawatts of capacity
or more for a term exceeding five years.
    Subd. 4. Exception for facilities that offset emissions. (a) The prohibitions in
subdivision 3 do not apply if the project proponent demonstrates to the Public Utilities
Commission's satisfaction that it will offset the new contribution to statewide power sector
carbon dioxide emissions with a carbon dioxide reduction project identified in paragraph
(b) and in compliance with paragraph (c).
    (b) A project proponent may offset in an amount equal to or greater than the
proposed new contribution to statewide power sector carbon dioxide emissions in either,
or a combination of both, of the following ways:
    (1) by reducing an existing facility's contribution to statewide power sector carbon
dioxide emissions; or
    (2) by purchasing carbon dioxide allowances from a state or group of states that has a
carbon dioxide cap and trade system in place that produces verifiable emissions reductions.
    (c) The Public Utilities Commission shall not find that a proposed carbon dioxide
reduction project identified in paragraph (b) acceptably offsets a new contribution
to statewide power sector carbon dioxide emissions unless the proposed offsets are
permanent, quantifiable, verifiable, enforceable, and would not have otherwise occurred.
This section does not exempt emissions that have been offset under this subdivision and
emissions exempted under subdivisions 5 to 7 from a cap and trade system if adopted by
the state.
    Subd. 5. Exception for new steel production facility. The prohibitions in
subdivision 3 do not apply to increases in statewide power sector carbon dioxide
emissions from a new steel production project located in a taconite relief area that has
filed an application for an air quality permit from the Pollution Control Agency prior
to January 1, 2007.
    Subd. 6. Exception for iron nugget production facility. The prohibitions in
subdivision 3 do not apply to an iron nugget production facility that began construction
prior to January 31, 2007, nor to associated mining activities and beneficiation facilities
with a concentrate capacity of up to three million tons annually. For the purposes of this
subdivision, "iron nugget" means a product with at least 90 percent iron content.
    Subd. 7. Other exemptions. The prohibitions in subdivision 3 do not apply to:
    (1) a new large energy facility under consideration by the Public Utilities
Commission pursuant to proposals or applications filed with the Public Utilities
Commission before April 1, 2007, or to any power purchase agreement related to a facility
described in this clause. The exclusion of pending proposals and applications from the
prohibitions in subdivision 3 does not limit the applicability of any other law and is not an
expression of legislative intent regarding whether any pending proposal or application
should be approved or denied;
    (2) a contract not subject to commission approval that was entered into prior to
April 1, 2007, to purchase power from a new large energy facility that was approved by
a comparable authority in another state prior to that date, for which municipal or public
power district bonds have been issued, and on which construction has begun; or
    (3) a new large energy facility or a power purchase agreement between a Minnesota
utility and a new large energy facility located outside Minnesota that the Public
Utilities Commission has determined is essential to ensure the long-term reliability of
Minnesota's electric system, to allow electric service for increased industrial demand,
or to avoid placing a substantial financial burden on Minnesota ratepayers. An order
of the commission granting an exemption under this clause is stayed until the June 1
following the next regular or annual session of the legislature that begins after the date
of the commission's final order.
    Subd. 8. Enforcement. Whenever the commission or the Department of Commerce
determines that any person is violating or about to violate this section, it may refer the
matter to the attorney general who shall take appropriate legal action. This section may
be enforced by the attorney general on the same basis as a law listed in section 8.31,
subdivision 1, except that the remedies provided by section 8.31, subdivision 3a, do not
apply to a violation of this section.

    Sec. 4. [216H.06] GREENHOUSE GAS EMISSIONS CONSIDERATION IN
RESOURCE PLANNING.
    By January 1, 2008, the Public Utilities Commission shall establish an estimate of
the likely range of costs of future carbon dioxide regulation on electricity generation.
The estimate, which may be made in a commission order, must be used in all electricity
generation resource acquisition proceedings. The estimates, and annual updates, must be
made following informal proceedings conducted by the commissioners of commerce and
pollution control that allow interested parties to submit comments.

ARTICLE 6
RENEWABLE ENERGY STANDARDS

    Section 1. Minnesota Statutes 2006, section 216B.1691, subdivision 5, as amended by
Laws 2007, chapter 3, section 1, subdivision 5, is amended to read:
    Subd. 5. Technology based on fuel combustion. (a) Electricity produced by fuel
combustion through fuel blending or co-firing under paragraph (b) may only count toward
a utility's objectives or standards 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) (5), 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
toward an electric utility's renewable energy objectives.

    Sec. 2. Minnesota Statutes 2006, section 216B.1691, subdivision 7, as added by Laws
2007, chapter 3, section 1, subdivision 7, is amended to read:
    Subd. 7. Compliance. The commission must regularly investigate whether an
electric utility is in compliance with its good-faith objective under subdivision 2 and
standard obligation under subdivision 2a. If the commission finds noncompliance, it may
order the electric utility to construct facilities, purchase energy generated by eligible
energy technology, purchase renewable energy credits, or engage in other activities
to achieve compliance. If an electric utility fails to comply with an order under this
subdivision, the commission may impose a financial penalty on the electric utility in an
amount not to exceed the estimated cost of the electric utility to achieve compliance. The
penalty may not exceed the lesser of the cost of constructing facilities or purchasing
credits. The commission must deposit financial penalties imposed under this subdivision
in the energy and conservation account established in the special revenue fund under
section 216B.241, subdivision 2a. This subdivision is in addition to and does not limit any
other authority of the commission to enforce this section.
Presented to the governor May 22, 2007
Signed by the governor May 25, 2007, 12:57 p.m.

700 State Office Building, 100 Rev. Dr. Martin Luther King Jr. Blvd., St. Paul, MN 55155 ♦ Phone: (651) 296-2868 ♦ TTY: 1-800-627-3529 ♦ Fax: (651) 296-0569