Minnesota Session Laws - 1999, Regular Session

                            CHAPTER 140-S.F.No. 1357 
                  An act relating to utilities; modifying conservation 
                  improvement provisions; amending Minnesota Statutes 
                  1998, sections 216B.16, subdivision 6b; and 216B.241, 
                  subdivisions 1, 1a, 1b, 2, 2a, and 2b. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  Minnesota Statutes 1998, 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 (d) (e), 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 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 of public service pursuant to 
        section 216B.241, subdivision 1a, paragraph (b).  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 of public service pursuant to section 
        216B.241, subdivision 1a, paragraph (b), 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.  
           Sec. 2.  Minnesota Statutes 1998, section 216B.241, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [DEFINITIONS.] For purposes of this section 
        and section 216B.16, subdivision 6b, the terms defined in this 
        subdivision have the meanings given them.  
           (a) "Commission" means the public utilities commission. 
           (b) "Commissioner" means the commissioner of public service.
           (c) "Customer facility" means all buildings, structures, 
        equipment, and installations at a single site. 
           (d) "Department" means the department of public service. 
           (d) (e) "Energy conservation improvement" means the 
        purchase or installation of a device, method, or material, or 
        project that: 
           (1) reduces consumption of or increases efficiency in the 
        use of electricity or natural gas, including, but not limited to:
           (1) insulation and ventilation;, 
           (2) storm or thermal doors or windows;, 
           (3) caulking and weatherstripping;, 
           (4) furnace efficiency modifications;, 
           (5) thermostat or lighting controls;, 
           (6) awnings;, or 
           (7) systems to turn off or vary the delivery of energy. The 
        term "energy conservation improvement" includes a device or 
        method that; 
           (2) creates, converts, or actively uses energy from 
        renewable sources such as solar, wind, and biomass, provided 
        that the device or method conforms with national or state 
        performance and quality standards whenever applicable; 
           (3) seeks to provide energy savings through reclamation or 
        recycling and that is used as part of the infrastructure of an 
        electric generation, transmission, or distribution system within 
        the state or a natural gas distribution system within the state; 
        or 
           (4) provides research or development of new means of 
        increasing energy efficiency or conserving energy or research or 
        development of improvement of existing means of increasing 
        energy efficiency or conserving energy.  
           (e) (f) "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.  
           (g) "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. 
           Sec. 3.  Minnesota Statutes 1998, section 216B.241, 
        subdivision 1a, is amended to read: 
           Subd. 1a.  [INVESTMENT, EXPENDITURE, AND CONTRIBUTION; 
        REGULATED UTILITIES 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, .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 of the department of 
        public service pursuant to paragraph (b). 
           (b) The owner of a large electric customer facility may 
        petition the commissioner of the department of public service 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 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 mid-range 
        forecast assumptions.  
           (d) A public utility or owner of a large electric customer 
        facility may appeal a decision of the commissioner under this 
        paragraph (b) or (c) to the commission under subdivision 2.  In 
        reviewing a decision of the commissioner under this 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 programs energy 
        conservation improvements; or 
           (2) otherwise not be in the public interest. 
           (c) (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.  Contributions 
        must be remitted to the commissioner of public service 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. 
           Sec. 4.  Minnesota Statutes 1998, section 216B.241, 
        subdivision 1b, is amended to read: 
           Subd. 1b.  [CONSERVATION IMPROVEMENTS; COOPERATIVES; 
        MUNICIPALITIES IMPROVEMENT BY COOPERATIVE ASSOCIATION OR 
        MUNICIPALITY.] (a) This subdivision applies to: 
           (1) a cooperative electric association that generates and 
        transmits electricity to associations that provide electricity 
        at retail including a cooperative electric association not 
        located in this state that serves associations or others in the 
        state; 
           (2) a municipality that provides electric service to retail 
        customers; and 
           (3) a municipality with gross operating revenues in excess 
        of $5,000,000 from sales of natural gas to retail customers.  
           (b) Each cooperative electric association and municipality 
        subject to this subdivision shall spend and invest for energy 
        conservation improvements under this subdivision the following 
        amounts: 
           (1) for a municipality, .5 0.5 percent of its gross 
        operating revenues from the sale of gas and one percent of its 
        gross operating revenues from the sale of electricity not 
        purchased from a public utility governed by subdivision 1a or a 
        cooperative electric association governed by this subdivision, 
        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 association subject 
        to this subdivision shall identify and implement energy 
        conservation improvement spending and investments that are 
        appropriate for the municipality or association, except that a 
        municipality or association may not spend or invest for energy 
        conservation improvements that directly benefit a large electric 
        customer facility.  Each municipality and cooperative electric 
        association subject to this subdivision may spend and invest 
        annually up to 15 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.  Load management may be used 
        to meet the requirements of this subdivision if it reduces the 
        demand for or increases the efficiency of electric services.  A 
        generation and transmission cooperative electric association may 
        include as spending and investment required under this 
        subdivision conservation improvement spending and investment by 
        cooperative electric associations that provide electric service 
        at retail to consumers and that are served by the generation and 
        transmission association.  By February 1 of each year, each 
        municipality or cooperative shall report to the commissioner its 
        energy conservation improvement spending and investments with a 
        brief analysis of effectiveness in reducing consumption of 
        electricity or gas.  The commissioner shall review each report 
        and make recommendations, where appropriate, to the municipality 
        or association to increase the effectiveness of conservation 
        improvement activities.  The commissioner shall also review each 
        report 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 of less than 185 percent of the 
        federal poverty level. 
           (d) 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.  Any amount contributed must be remitted to the 
        commissioner of public service by February 1 of each year. 
           Sec. 5.  Minnesota Statutes 1998, section 216B.241, 
        subdivision 2, is amended to read: 
           Subd. 2.  [PROGRAMS.] The commissioner may by rule 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 a 
        two-year period.  The commissioner shall require at least one 
        public utility to establish a pilot program to make investments 
        in and expenditures for energy from renewable resources such as 
        solar, wind, or biomass and 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 rules of the department must provide to the 
        extent practicable for a free choice, by consumers participating 
        in the program, of the device, method, or 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.  
        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.  Load management may be used 
        to meet the requirements for energy conservation improvements 
        under this section if it results in a demonstrable reduction in 
        consumption of energy.  Each public utility subject to 
        subdivision 1a may spend and invest annually up to 15 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.  A public utility may not 
        spend for or invest in energy conservation improvements that 
        directly benefit 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 or 
        community organization.  No utility may make an energy 
        conservation improvement under this section to a building 
        envelope unless: 
           (1) it is the primary supplier of energy used for either 
        space heating or cooling in the building; 
           (2) the commissioner determines that special circumstances, 
        which that would unduly restrict the availability of 
        conservation programs, warrant otherwise; or 
           (3) the utility has been awarded a contract under 
        subdivision 2a. 
           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 unless an insufficient number of 
        appropriate programs are available. 
           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 person petitioning 
        for commission review has the burden of proof.  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.
           Sec. 6.  Minnesota Statutes 1998, section 216B.241, 
        subdivision 2a, is amended to read: 
           Subd. 2a.  [ENERGY AND CONSERVATION ACCOUNT.] The 
        commissioner must deposit money contributed under subdivisions 
        1a and 1b in the energy and conservation account in the general 
        fund.  Money in the account is appropriated to the department 
        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.  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 children, families, and learning 
        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. 
           Sec. 7.  Minnesota Statutes 1998, section 216B.241, 
        subdivision 2b, is amended to read: 
           Subd. 2b.  [RECOVERY OF EXPENSES FOR FEES, TAXES, PERMITS.] 
        The commission shall allow a utility to recover expenses 
        resulting from a conservation improvement program required by 
        the department 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 of 
        public service has issued an exemption under subdivision 1a, 
        paragraph (b), and .6 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 of public service 
        has issued an exemption under subdivision 1a, paragraph (b), for 
        that year for energy conservation improvements under this 
        section. 
           Sec. 8.  [REPORT ON CONSERVATION IMPROVEMENT PROGRAM.] 
           The commissioner of the department of public service shall 
        consult with representatives from public utilities, cooperative 
        and municipal utilities, environmental and energy conservation 
        groups, office of the attorney general, and state agencies to 
        evaluate possible changes in the conservation improvement 
        program.  The commissioner shall report to the chairs of the 
        house and senate committees and subcommittees with jurisdiction 
        over energy utilities by January 15, 2001, on the work and 
        findings of the department of public service and any 
        recommendations. 
           Sec. 9.  [EFFECTIVE DATE.] 
           Sections 2 and 3 are effective the day following final 
        enactment. 
           Presented to the governor May 7, 1999 
           Signed by the governor May 11, 1999, 1:38 p.m.