1.1                          A bill for an act 
  1.2             relating to utilities; restructuring regulation of the 
  1.3             generation, transmission, and distribution of 
  1.4             electricity; providing for transition to competitive 
  1.5             industry; allowing cooperative electric associations 
  1.6             to opt out; requiring restructuring plans; requiring 
  1.7             unbundling of services; providing for recovery of 
  1.8             stranded costs; requiring access to facilities; 
  1.9             requiring registration of suppliers; abolishing 
  1.10            personal property tax on generation; abolishing 
  1.11            certificate of need and resources planning processes; 
  1.12            establishing legislative oversight committee; 
  1.13            proposing coding for new law as Minnesota Statutes, 
  1.14            chapter 216E. 
  1.15  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.16     Section 1.  [216E.01] [SHORT TITLE.] 
  1.17     This chapter may be referred to as the Minnesota Electric 
  1.18  Industry Restructuring Act. 
  1.19     Sec. 2.  [216E.02] [LEGISLATIVE FINDINGS.] 
  1.20     The legislature finds and declares as follows: 
  1.21     (a) The generation of electricity is no longer a natural 
  1.22  monopoly and therefore should not be regulated as if it were a 
  1.23  natural monopoly. 
  1.24     (b) Regulation of the electric generation industry has 
  1.25  resulted in uncompetitive rates that vary considerably among 
  1.26  electric utilities. 
  1.27     (c) Uneconomical rates and rate disparities hinder the 
  1.28  sustained and orderly economic development of Minnesota. 
  1.29     (d) Restructuring the electric generation industry to 
  1.30  facilitate retail competition and customer choice will lower 
  2.1   prices, increase customer choice, and improve the quality and 
  2.2   variety of generation services available, thereby promoting the 
  2.3   public interest. 
  2.4      (e) It is technically and administratively practical to 
  2.5   restructure the electric industry in Minnesota to promote retail 
  2.6   customer choice. 
  2.7      (f) Competition in the retail market for electricity will 
  2.8   have long-term benefits for the economy of Minnesota, including 
  2.9   lower prices for electrical service to all consumers, more 
  2.10  efficient use of resources, innovation in service and supply, 
  2.11  and a more diverse and decentralized electricity supply system. 
  2.12     (g) A competitive marketplace is the most efficient way to 
  2.13  lower prices, increase value for consumers, and reduce the cost 
  2.14  of regulatory oversight. 
  2.15     (h) The economy of Minnesota is dependent upon the 
  2.16  availability of reliable, low-cost energy, which is essential to 
  2.17  the economic viability of the state. 
  2.18     (i) Restructuring the regulation of electric utilities to 
  2.19  provide greater competition and more efficient regulation is a 
  2.20  nationwide phenomenon and Minnesota must aggressively pursue 
  2.21  restructuring and increased customer choice in order to provide 
  2.22  electric service at lower and more competitive rates. 
  2.23     (j) Therefore, the legislature hereby finds that it is in 
  2.24  the public interest to permit all retail electric customers to 
  2.25  choose their supplier of electric generation services in a 
  2.26  competitive market and to continue to regulate electric 
  2.27  transmission and distribution in order to provide safe and 
  2.28  reliable electricity at the lowest possible prices for all 
  2.29  consumers, while maintaining the consumer services of customer 
  2.30  assistance and reliability. 
  2.31     Sec. 3.  [216E.03] [POLICY AND GENERAL PRINCIPLES.] 
  2.32     Subdivision 1.  [GENERALLY.] It is the policy of the 
  2.33  legislature to authorize and permit competition in the supply of 
  2.34  electricity to consumers in Minnesota only in accordance with 
  2.35  the general principles listed in this section and with the 
  2.36  subsequent provisions of this chapter. 
  3.1      Subd. 2.  [COMPETITION.] Competitive markets are preferred 
  3.2   to regulation.  Regulation should serve as a substitute only in 
  3.3   those circumstances when competition cannot provide results that 
  3.4   serve the best interests of all consumers.  
  3.5      Subd. 3.  [CUSTOMER CHOICE.] To realize the full benefits 
  3.6   of competition, customers should be able to choose among and 
  3.7   access a wide array of competing, qualified suppliers of 
  3.8   electricity.  Customers must have the opportunity to benefit 
  3.9   from competition, which should be implemented in a fair and 
  3.10  equitable manner.  Customers should be made aware of their new 
  3.11  rights and the benefits and risks of customer choice. 
  3.12     Subd. 4.  [UNBUNDLING OF SERVICES.] Generation services 
  3.13  should become fully competitive, while the provision of 
  3.14  transmission and distribution should accomplish the triple 
  3.15  objectives of open access, comparability of service for all 
  3.16  users, and nondiscriminatory pricing, while recognizing that 
  3.17  federal and state jurisdictional uncertainties over wholesale 
  3.18  and retail services should be resolved.  Companies that own both 
  3.19  transmission and distribution, as well as generation, should not 
  3.20  be allowed to use a monopoly position in those services as a 
  3.21  barrier to competition in generation.  The determinations of 
  3.22  corporate structure, excluding market power issues, should be 
  3.23  left to the marketplace and not dictated by the government. 
  3.24     Subd. 5.  [OPEN ACCESS.] Customer access to alternative 
  3.25  suppliers of electricity requires open access to the 
  3.26  transmission grid and distribution system and is critical to 
  3.27  creating a fully competitive market structure.  Owners, 
  3.28  operators, and providers of transmission and distribution 
  3.29  facilities and services, including federal, state, and local 
  3.30  public power agencies, should be required to provide access to 
  3.31  those facilities, ancillary services, and other services 
  3.32  available to a buyer or seller on a nondiscriminatory and 
  3.33  comparable basis, which are not available competitively.  An 
  3.34  independent system operator must be established to assure open 
  3.35  access. 
  3.36     Subd. 6.  [FAIR DEALING.] Competition among electric 
  4.1   suppliers and buyers must be fair, nondiscriminatory, and 
  4.2   consistent.  In order to ensure a level playing field, all 
  4.3   competitors should be subject to the same legal, regulatory, and 
  4.4   tax treatments.  Subsidies and disparate regulation or legal 
  4.5   requirements that favor certain competitors or disadvantage 
  4.6   others should be eliminated.  No competitor shall be allowed 
  4.7   access to a utility's customers unless comparable and reciprocal 
  4.8   access is provided to that competitor's customers. 
  4.9      Subd. 7.  [RELIABILITY AND SAFETY.] Reliable and safe 
  4.10  electric service must be maintained or improved.  Minnesota and 
  4.11  federal regulators should have the necessary authority to ensure 
  4.12  the reliability and safety of the electric system. 
  4.13     Subd. 8.  [RECOVERY OF STRANDED COSTS.] Following the 
  4.14  process established in this chapter, investor-owned utilities, 
  4.15  and those consumer-owned utilities that do not opt out, are 
  4.16  entitled to recover a portion of prudently incurred net, 
  4.17  verifiable, stranded costs and investments.  Mechanisms to 
  4.18  determine net stranded costs and investments, including 
  4.19  mitigation incentives, include a public process that applies to 
  4.20  investments and costs stranded by competition, within the time 
  4.21  designated in this chapter, and must not disadvantage one class 
  4.22  of customer or supplier over another.  The amount of recovery 
  4.23  will be determined by the commission. 
  4.24     Subd. 9.  [SANCTITY OF CONTRACT.] The rights and 
  4.25  obligations embodied in contractual arrangements are and will be 
  4.26  an indispensable element of an effective competitive power 
  4.27  market.  This chapter does not interfere with the rights of 
  4.28  parties under existing contracts. 
  4.29     Subd. 10.  [ENVIRONMENTAL AND SOCIAL POLICY.] The energy 
  4.30  marketplace should not be used as a vehicle for accomplishing 
  4.31  government-mandated, government-sponsored, consumer- or 
  4.32  taxpayer-subsidized social or environmental programs.  These 
  4.33  programs should not be incorporated in electric utility rate 
  4.34  structures but instead be unbundled from rates.  The costs of 
  4.35  these social programs, such as maintenance of minimum living 
  4.36  standards or environmental programs, should be financed by 
  5.1   legislatively enacted separate charges.  However, consumers 
  5.2   should be allowed to choose suppliers of electricity generated 
  5.3   from environmentally friendly sources of generation. 
  5.4      Subd. 11.  [TRANSMISSION AND DISTRIBUTION PRICING.] To the 
  5.5   extent that Minnesota has jurisdiction over transmission and 
  5.6   distribution pricing, pricing methodologies should be encouraged 
  5.7   to enhance reliability, compensate transmission owners fairly, 
  5.8   allow for widest possible markets, and relieve transmission 
  5.9   congestion. 
  5.10     Subd. 12.  [TRANSITION TO COMPETITION/DATE CERTAIN.] This 
  5.11  chapter establishes a date certain to accomplish the transition 
  5.12  to competition.  During this limited time frame for the 
  5.13  transition from a regulated monopoly to competition, rates 
  5.14  should be reduced and certain, appropriate regulatory approvals 
  5.15  should be secured, and an appropriate market structure 
  5.16  established.  In addition, sufficient measures to preserve the 
  5.17  integrity, safety, and reliability of Minnesota's electric 
  5.18  system should be established. 
  5.19     Subd. 13.  [OBLIGATION TO CONNECT.] In a competitive retail 
  5.20  market, local utilities should be relieved of the traditional 
  5.21  obligation to serve the public, which should be replaced with an 
  5.22  obligation to connect, and distribution should remain a 
  5.23  regulated monopoly service for incumbent providers with a 
  5.24  competitive bidding process developed to establish a default 
  5.25  electric generation provider. 
  5.26     Subd. 14.  [TAX REVENUES.] The department of revenue should 
  5.27  assess the amount of state and local tax revenues derived from 
  5.28  previously regulated electric suppliers that will enter the 
  5.29  competitive market and note how revenues to each state or local 
  5.30  government entity are changed by restructuring to competition.  
  5.31  Personal property taxes on electric generation equipment should 
  5.32  be phased out through a ten percent reduction each year for ten 
  5.33  years beginning January 1, 1998. 
  5.34     Subd. 15.  [FEDERAL BARRIERS.] The repeal of the Public 
  5.35  Utility Holding Company Act of 1935 (PUHCA) and the Public 
  5.36  Utility Regulatory Policies Act of 1978 (PURPA) and the reform 
  6.1   of other federal laws that impeded competitive electric markets 
  6.2   must be accomplished to complement Minnesota's plans for the 
  6.3   transition to customer choice.  The process of restructuring 
  6.4   generation services with consumer choice has profound interstate 
  6.5   implications.  Ensured reliability of the grid, consumer and 
  6.6   supplier access to sufficiently wide markets, a competitive 
  6.7   playing field free of uneven subsidies and anticompetitive 
  6.8   advantages, and resolution of existing state and federal 
  6.9   jurisdiction over transmission and distribution services are all 
  6.10  essential to workable competition. 
  6.11     Sec. 4.  [216E.04] [DEFINITIONS.] 
  6.12     Subdivision 1.  [SCOPE.] For the purposes of this chapter, 
  6.13  the terms defined in this section have the meanings given them. 
  6.14     Subd. 2.  [COMMISSION.] "Commission" means the public 
  6.15  utilities commission. 
  6.16     Subd. 3.  [DEPARTMENT.] "Department" means the department 
  6.17  of public service. 
  6.18     Subd. 4.  [ELECTRIC UTILITY.] "Electric utility" means a 
  6.19  public utility, as defined in section 216B.02, subdivision 4, 
  6.20  and includes every municipality that furnishes retail electric 
  6.21  service in Minnesota on the day following final enactment of 
  6.22  this section.  The term also includes every electric cooperative 
  6.23  association, or its successor, that does not opt out of the 
  6.24  provisions of this chapter as provided in section 216E.05, 
  6.25  subdivision 6, that provides retail electric service in 
  6.26  Minnesota on the day following final enactment of this section. 
  6.27     Subd. 5.  [LOCAL DISTRIBUTION UTILITY OR LDU.] "Local 
  6.28  distribution utility" or "LDU" means an electric utility that 
  6.29  distributes electricity to end-use customer locations. 
  6.30     Subd. 6.  [PUHCA.] "PUHCA" is an abbreviation for the 
  6.31  federal Public Utility Holding Company Act of 1935, as amended. 
  6.32     Subd. 7.  [PURPA.] "PURPA" is an abbreviation for the 
  6.33  federal Public Utility Regulatory Policies Act of 1978, as 
  6.34  amended. 
  6.35     Sec. 5.  [216E.05] [STANDARDS FOR RETAIL ELECTRIC 
  6.36  COMPETITION PLANS.] 
  7.1      Subdivision 1.  [COMPETITIVE MARKET.] No later than January 
  7.2   1, 1999, electric generation must be deregulated and subject to 
  7.3   the competitive market for consumers with loads of less than 750 
  7.4   kilowatts per location in accordance with the industry 
  7.5   restructuring plan developed by the commission.  No later than 
  7.6   January 1, 2000, electric generation must be deregulated and 
  7.7   subject to the competitive market for all consumers, according 
  7.8   to the provisions of the industry restructuring plan developed 
  7.9   by the commission. 
  7.10     Subd. 2.  [ADOPTION.] The commission shall adopt and 
  7.11  publish a preliminary plan no later than December 1, 1997, and a 
  7.12  final plan no later than July 1, 1998, for restructuring the 
  7.13  Minnesota electric industry, consistent with the policies and 
  7.14  procedures established under this chapter, with the objective of 
  7.15  having full customer choice no later than January 1, 2000.  The 
  7.16  plan shall address appropriate steps to achieve an orderly 
  7.17  transition to a competitive market. 
  7.18     Subd. 3.  [CONTENTS OF PLAN.] The plan must incorporate the 
  7.19  substance of this chapter and may include other provisions as 
  7.20  the commission deems appropriate and necessary to expedite the 
  7.21  transition to full customer choice.  The plan must include: 
  7.22     (1) a rate reduction of 7.5 percent for each residential 
  7.23  customer and for each nonresidential customer with loads of less 
  7.24  than 750 kilowatts per location; 
  7.25     (2) rate certainty, through a cap of rates at levels in 
  7.26  effect on the effective date of this section, for every customer 
  7.27  class that does not receive a mandated reduction; 
  7.28     (3) a program to allow all customers, beginning January 1, 
  7.29  1998, to purchase from generators or market aggregators that 
  7.30  have generation portfolios that have at least 50 percent of 
  7.31  their generation portfolios composed of generation sources such 
  7.32  as wind, hydroelectric, or closed-loop biomass; 
  7.33     (4) recommendations on outstanding federal issues affecting 
  7.34  Minnesota and this chapter; 
  7.35     (5) identification of appropriate regulatory approvals; and 
  7.36     (6) allowance for public comment. 
  8.1      Subd. 4.  [CONSUMER EDUCATION AND INFORMATION.] The plan 
  8.2   developed by the commission must include a program for making 
  8.3   retail customers aware of their new rights and the benefits and 
  8.4   risks of customer choice. 
  8.5      Subd. 5.  [APPLICABILITY.] Except as provided in 
  8.6   subdivision 6, the plan applies to all electric utilities. 
  8.7      Subd. 6.  [COOPERATIVE ELECTRIC ASSOCIATION OPT OUT.] Each 
  8.8   cooperative electric association organized under chapter 308A 
  8.9   and producing or furnishing electric service may opt out of the 
  8.10  provisions of the commission's plan issued pursuant to this 
  8.11  chapter, except for the requirements in subdivision 3, clause 
  8.12  (3), through a vote of a majority of its customers in each 
  8.13  customer class voting to opt out of the commission plan before 
  8.14  January 1, 1998.  If an electric cooperative association opts 
  8.15  out of the plan, another vote must be conducted within 12 months 
  8.16  and annually thereafter until the electric cooperative 
  8.17  association does not vote to opt out of the plan. 
  8.18     Sec. 6.  [216E.06] [ELECTRIC UTILITY RESTRUCTURING PLANS.] 
  8.19     No later than September 1, 1997, the department of public 
  8.20  service shall file a utility restructuring plan for review and 
  8.21  comment before the commission, providing for customer choice as 
  8.22  set forth in this chapter and establishing a protocol for the 
  8.23  disaggregation of services as required by this section.  The 
  8.24  plan must include: 
  8.25     (1) a schedule for the introduction of customer choice for 
  8.26  the customers currently served by electric utilities; and 
  8.27     (2) the manner in which it will otherwise comply with each 
  8.28  provision of this chapter. 
  8.29     Sec. 7.  [216E.07] [RETAIL CUSTOMER CHOICE.] 
  8.30     Subdivision 1.  [GENERAL REQUIREMENT.] All retail customers 
  8.31  shall have customer choice as mandated by section 216E.05 
  8.32  through the means described in this section. 
  8.33     Subd. 2.  [BILATERAL CONTRACT.] Retail customers may 
  8.34  negotiate a bilateral contract with a generator of electricity, 
  8.35  providing that the electricity be transmitted and distributed to 
  8.36  the retail customer, subject to the restrictions contained in 
  9.1   this section. 
  9.2      Subd. 3.  [MARKET AGGREGATOR.] Retail customers may choose 
  9.3   to receive generation and other energy services from a market 
  9.4   aggregator.  Market aggregators may generate electricity 
  9.5   directly, buy and sell electricity, or enter into financial 
  9.6   contracts for electric generation resources.  Market aggregators 
  9.7   may be brokers, associations, cooperatives, buying clubs, groups 
  9.8   of independent school districts, municipalities, or other 
  9.9   entities that buy or arrange for electric generation services 
  9.10  through a power pool or through direct contracts. 
  9.11     Subd. 4.  [DEFAULT PROVIDER.] A default provider for a 
  9.12  local distribution customer who has not chosen an alternative 
  9.13  source of generation must be established by the commission 
  9.14  through a competitive bidding process for each LDU service 
  9.15  territory.  The commission shall set forth standards to ensure 
  9.16  the participation of default providers serving all classes of 
  9.17  customers. 
  9.18     Sec. 8.  [216E.08] [UNBUNDLING OF SERVICES.] 
  9.19     Subdivision 1.  [GENERAL REQUIREMENT.] The commission plan 
  9.20  for restructuring of the electric utilities shall require that 
  9.21  all existing electric utilities shall operationally or 
  9.22  financially separate electric generation, transmission, and 
  9.23  distribution assets and operations as described in this section. 
  9.24     Subd. 2.  [COMPARABILITY OF SERVICES AND NONDISCRIMINATORY 
  9.25  PRICING STANDARDS.] (a) Both LDUs and other companies that are 
  9.26  not LDUs or electric utilities may own transmission facilities. 
  9.27     (b) Affiliates of electric utilities and LDUs may own 
  9.28  electric generation assets.  These affiliates may sell 
  9.29  generation directly to a customer, provided that generation 
  9.30  assets and services are operationally separate from transmission 
  9.31  or distribution affiliates, if any. 
  9.32     (c) Affiliates of electric utilities and LDUs may offer 
  9.33  unbundled generation services as approved by the commission.  
  9.34  Prices for unbundled generation services must be determined by 
  9.35  competitive market forces.  The commission shall not establish 
  9.36  prices for unbundled generation services. 
 10.1      (d) The commission shall adopt a plan designed to permit 
 10.2   all providers of generation services to compete equally to 
 10.3   supply power to Minnesota and to mitigate concentrations of 
 10.4   undue market power. 
 10.5      Sec. 9.  [216E.09] [RECOVERY OF STRANDED COSTS.] 
 10.6      Subdivision 1.  [GENERAL POLICY.] (a) Following the process 
 10.7   established herein, investor-owned and municipal utilities and 
 10.8   those electric cooperative associations that do not opt out are 
 10.9   entitled to recover 50 percent of prudently incurred net, 
 10.10  verifiable stranded costs and investments directly related to 
 10.11  the generation of electricity by January 1, 2002.  The amount of 
 10.12  recovery will be determined by the commission. 
 10.13     (b) It is the intent of the legislature to provide 
 10.14  appropriate tools and reasonable guidance to the commission in 
 10.15  order to assist in addressing claims for stranded cost recovery 
 10.16  and fulfilling its responsibility to determine rates that are 
 10.17  equitable, appropriate, and balanced and in the public 
 10.18  interest.  In making its determinations, the commission shall 
 10.19  balance the interests of the consumers and utility investors 
 10.20  during the limited recovery period.  Nothing in this section is 
 10.21  intended to provide any greater opportunity for stranded cost 
 10.22  recovery than is available under applicable regulation or 
 10.23  statute on the effective date of this act. 
 10.24     Subd. 2.  [NORMAL COURSE OF BUSINESS.] Stranded cost 
 10.25  charges are not recoverable for changes in usage occurring in 
 10.26  the normal course of business, including those resulting from 
 10.27  changes in business cycles, termination of operations, weather, 
 10.28  reduced production, changes in manufacturing processes, 
 10.29  installation or expansion of new self-generation or cogeneration 
 10.30  equipment, performance of existing self-generation or 
 10.31  cogeneration equipment, energy conservation efforts, or other 
 10.32  similar factors.  Standard cost charges are not recoverable for 
 10.33  any losses attributable to the rate reduction mandated by this 
 10.34  chapter. 
 10.35     Subd. 3.  [DUTIES AND RESPONSIBILITIES OF COMMISSION.] (a) 
 10.36  Electric utilities have the duty to prudently, thoroughly, and 
 11.1   aggressively mitigate stranded costs. 
 11.2      (b) Each electric utility may file a recovery plan within 
 11.3   three months after adoption of the plan by the commission 
 11.4   pursuant to this section.  The recovery plan shall: 
 11.5      (1) document anticipated stranded costs, mitigation 
 11.6   proposals, and offsetting increases in the value of other 
 11.7   assets; 
 11.8      (2) propose a transition charge that must be allocated to 
 11.9   all customers pursuant to the most recent rate design approved 
 11.10  by the commission subject to paragraph (f); 
 11.11     (3) permit collection of a transition charge to recover 
 11.12  net, unmitigated stranded costs over a period of not less than 
 11.13  three nor more than five years; 
 11.14     (4) establish net, unmitigable stranded costs, and a 
 11.15  limited recovery period designed to recover those costs 
 11.16  expeditiously, provided that the recovery period and the amount 
 11.17  of qualified transition costs yield a transition charge which 
 11.18  will not cause the total price for electric power, including 
 11.19  transmission and distribution services, for any customer to 
 11.20  exceed the cost per kilowatt-hour paid on the effective date of 
 11.21  this section during the recovery period; and 
 11.22     (5) not allow the utilization of recovery mechanisms that 
 11.23  impede competition such as entry and exit fees. 
 11.24     (c) The commission shall approve and publish a recovery 
 11.25  plan for each electric utility submitting a plan no later than 
 11.26  December 31, 1998. 
 11.27     (d) Stranded costs not recovered under this chapter and the 
 11.28  recovery plan, as modified and approved by the commission, 
 11.29  within five years are not recoverable by the electric utility. 
 11.30     (e) Electric utilities have a duty to cooperate with the 
 11.31  commission in implementing this chapter, as a precondition for 
 11.32  recovery of stranded costs.  Approval of a recovery plan and 
 11.33  collection of any stranded costs shall be deemed a settlement of 
 11.34  all such claims by an electric utility.  No electric utility 
 11.35  seeking to establish claims for recovery of stranded costs 
 11.36  through any other means shall be eligible for recovery pursuant 
 12.1   to a recovery plan or the collection of a transition charge. 
 12.2      (f) The commission is responsible for the final 
 12.3   determination of permissible stranded cost recovery charges for 
 12.4   each electric utility and for approval of the recovery plan 
 12.5   subject to its determination in a rate case proceeding that the 
 12.6   charges and the plan are equitable, appropriate, balanced, and 
 12.7   promote customer choice. 
 12.8      Subd. 4.  [STRANDED COST RECOVERY CRITERIA AND 
 12.9   METHODOLOGY.] (a) Electric utilities are allowed to recover 50 
 12.10  percent of the net, unmitigable stranded costs associated with 
 12.11  required environmental mandates currently approved for cost 
 12.12  recovery and power acquisitions mandated by federal statutes. 
 12.13     (b) Electric utilities have had and continue to have an 
 12.14  obligation to take all reasonable measures to prudently, 
 12.15  thoroughly, and aggressively mitigate stranded costs.  
 12.16  Mitigation measures may include but are not limited to: 
 12.17     (1) reduction of expenses; 
 12.18     (2) renegotiation of existing contracts; 
 12.19     (3) refinancing of existing debt; 
 12.20     (4) sale, write-off, or write-down of uneconomic or surplus 
 12.21  assets, including regulatory assets not directly related to the 
 12.22  provision of electric service; and 
 12.23     (5) sale of all generation assets and power purchase 
 12.24  contracts through a competitive bidding process that could 
 12.25  include a bid from an affiliate of the electric utility. 
 12.26     (c) Stranded costs must be determined on a net basis, must 
 12.27  be verifiable, must not include transmission and distribution 
 12.28  assets, and should be reconciled to actual electricity market 
 12.29  conditions from time to time.  Stranded costs include an offset 
 12.30  for the market value of assets, domestic or foreign, obtained or 
 12.31  controlled by an electric utility by purchase acquisition, 
 12.32  merger, or other means within three years before the effective 
 12.33  date of this section. 
 12.34     (d) Power purchase contract obligations must continue for 
 12.35  the duration of the contract.  Costs arising pursuant to the 
 12.36  contracts or associated with a buy-out, buy-down, or 
 13.1   renegotiation of the contracts are eligible for recovery in 
 13.2   stranded cost recovery charges. 
 13.3      (e) A stranded benefit, which is a utility asset whose 
 13.4   market value exceeds the book value, must be used to reduce 
 13.5   stranded costs. 
 13.6      (f) A recovery of stranded costs must be through a 
 13.7   nonbypassable, nondiscriminatory, appropriately structured 
 13.8   charge that is fair to all customer classes, lawful, 
 13.9   constitutional, limited in duration, consistent with the 
 13.10  promotion of fully competitive markets and consistent with 
 13.11  section 216E.05.  Recovery mechanisms that impede competition, 
 13.12  such as entry and exit fees, must not be utilized.  Charges to 
 13.13  recover stranded costs only apply to customers within a 
 13.14  utility's retail service territory, except for these costs that 
 13.15  have resulted from providing wholesale power to another 
 13.16  utility.  The charges do not apply to wheeling-through 
 13.17  transactions nor should they apply to a competitive alternative 
 13.18  that existed before the effective date of this section, 
 13.19  including but not limited to, self-generation and sales of 
 13.20  nonfirm electricity. 
 13.21     (g) The commission is authorized to allow utilities to 
 13.22  collect a stranded cost recovery charge, subject to its 
 13.23  determination in the context of a rate case proceeding that the 
 13.24  charge is equitable, appropriate, and balanced; is in the public 
 13.25  interest; and is consistent with the intent of this chapter.  
 13.26  The burden of proof for a stranded cost recovery claim must be 
 13.27  borne by the electric utility making the claim. 
 13.28     Sec. 10.  [216E.10] [OPEN ACCESS.] 
 13.29     Subdivision 1.  [ACCESS REQUIRED.] Owners, operators, and 
 13.30  providers of transmission and distribution facilities and 
 13.31  ancillary services, including federal, state, and local public 
 13.32  power agencies, are required to provide access to those 
 13.33  facilities, ancillary services, and other services available to 
 13.34  any buyer or seller on a nondiscriminatory and comparable 
 13.35  basis.  The commission shall promote nondiscriminatory open 
 13.36  access to the electric system for wholesale and retail 
 14.1   transactions. 
 14.2      Subd. 2.  [TRANSMISSION OR DISTRIBUTION SERVICE 
 14.3   TARIFFS.] Companies providing transmission or distribution 
 14.4   services shall file at the Federal Energy Regulatory Commission 
 14.5   or with the commission, as appropriate, comparable service 
 14.6   tariffs that provide open access for competitors.  The 
 14.7   commission shall monitor jurisdictional companies providing 
 14.8   transmission or distribution services and take necessary 
 14.9   measures to ensure that no supplier has an unfair advantage in 
 14.10  offering access to and pricing those services. 
 14.11     Subd. 3.  [STANDARDS.] The commission shall establish by 
 14.12  rule, consistent with federal law, standards and conditions for 
 14.13  the exchange of reciprocal rights for transmission and 
 14.14  distribution access between corporations located within 
 14.15  Minnesota and those located outside the state. 
 14.16     Sec. 11.  [216E.11] [RELIABILITY AND SAFETY.] 
 14.17     Subdivision 1.  [RULES.] The commission shall adopt rules 
 14.18  to ensure that reliable and safe electric service, with minimum 
 14.19  residential consumer service safeguards, is maintained or 
 14.20  improved. 
 14.21     Subd. 2.  [PRESERVATION MEASURES.] Electric utilities and 
 14.22  providers of electric power delivery or ancillary services shall 
 14.23  have in place sufficient measures to preserve the integrity, 
 14.24  safety, reliability, and quality of electric service in 
 14.25  Minnesota.  Market entrants shall have appropriate provisions 
 14.26  for capacity reserves, spinning reserves, and other ancillary 
 14.27  services, while maintaining the integrity of the bulk 
 14.28  transmission network under the oversight of an independent 
 14.29  system operator. 
 14.30     Sec. 12.  [216E.12] [SUPPLIER REGISTRATION.] 
 14.31     Subdivision 1.  [REGISTRATION REQUIRED.] Suppliers of 
 14.32  electric supply and power delivery or ancillary services shall 
 14.33  register with the commission.  Registration must include the 
 14.34  following information: 
 14.35     (1) identifying information and a description of the form 
 14.36  of ownership; 
 15.1      (2) applicant's technical ability to obtain and deliver 
 15.2   electricity and provide any other proposed services; and 
 15.3      (3) documentation of financial capability of the applicant 
 15.4   to provide the proposed services. 
 15.5      Subd. 2.  [COMMISSION RESTRICTED.] The commission shall 
 15.6   neither limit market entry for economic reasons nor regulate 
 15.7   generation prices. 
 15.8      Sec. 13.  [216E.13] [PERSONAL PROPERTY TAXES, ENVIRONMENTAL 
 15.9   AND SOCIAL POLICIES.] 
 15.10     Subdivision 1.  [NO PERSONAL PROPERTY TAX.] Personal 
 15.11  property taxes on electric generation must be phased out through 
 15.12  a ten percent reduction each year for ten years beginning 
 15.13  January 1, 1998, so that by December 31, 2008, there are no 
 15.14  personal property taxes on electric generation equipment. 
 15.15     Subd. 2.  [MANDATED SUBSIDIES; LEGISLATIVE REPORT.] The 
 15.16  subsidies for environmental, social, and other mandated programs 
 15.17  should be unbundled from electric rates.  These programs should 
 15.18  be financed by general tax revenues or legislatively enacted 
 15.19  separate charges appearing on electric bills.  The commission 
 15.20  shall prepare and submit a report to the legislature for the 
 15.21  1998 session that recommends legislative action, as appropriate, 
 15.22  to remove barriers to fair competition. 
 15.23     Subd. 3.  [ENVIRONMENTAL COMPLIANCE PROCESS.] The 
 15.24  certificate of need process and resource planning process shall 
 15.25  expire effective December 31, 1997, and be replaced by an 
 15.26  environmental compliance process for new generation facilities.  
 15.27  This process must address the same environmental inquiries as 
 15.28  the current certificate of need process, except for those 
 15.29  involving the need for the facility or the alternative of not 
 15.30  building the facility. 
 15.31     Sec. 14.  [216E.14] [LEGISLATIVE OVERSIGHT.] 
 15.32     Subdivision 1.  [COMMITTEE.] A legislative oversight 
 15.33  committee on electric utility restructuring is established, 
 15.34  consisting of 14 members as follows: 
 15.35     (1) seven members of the house, at least three of which 
 15.36  appointed by the minority leader and the remainder appointed by 
 16.1   the speaker of the house; and 
 16.2      (2) seven members of the senate, at least three of which 
 16.3   appointed by the minority leader and the remainder appointed by 
 16.4   the president of the senate. 
 16.5      Subd. 2.  [TERMS.] Committee members shall be appointed 
 16.6   within 60 days of the effective date of this act to an initial 
 16.7   term expiring on December 31, 1998.  Subsequent terms shall be 
 16.8   for up to two years, expiring on January 1 of even-numbered 
 16.9   years.  Members may succeed themselves. 
 16.10     Subd. 3.  [CHAIR.] A majority of the committee members 
 16.11  shall select the chair.  
 16.12     Subd. 4.  [EXPIRATION.] The legislative oversight committee 
 16.13  on electric utility restructuring expires when the full 
 16.14  transition to retail competition is completed. 
 16.15     Subd. 5.  [ANNUAL REPORT.] The committee shall provide an 
 16.16  annual report on or before November 1 to the governor, the 
 16.17  speaker of the house, the senate president, and the commission 
 16.18  on the status of electric utility restructuring. 
 16.19     Subd. 6.  [MEETINGS.] The committee shall meet quarterly or 
 16.20  as often as is necessary to conduct its business. 
 16.21     Subd. 7.  [DUTIES.] The committee is responsible for: 
 16.22     (1) working with the commission to assess the transition to 
 16.23  a competitive market; 
 16.24     (2) working with the commission and other agencies, when 
 16.25  necessary, to implement this chapter, its legislative intent, 
 16.26  and its restructuring principles; and 
 16.27     (3) working with the commission to develop new legislation, 
 16.28  when necessary, to promote electric utility restructuring and 
 16.29  retail choice of electricity suppliers and to propose changes to 
 16.30  or recodification of existing statutes to be more consistent 
 16.31  with the restructuring principles established in this chapter. 
 16.32     Subd. 8.  [STATE TAX REVENUES.] The jobs, energy and 
 16.33  community development committee of the senate and the regulated 
 16.34  industries and energy committee of the house of representatives, 
 16.35  working with the department of revenue, shall analyze the amount 
 16.36  of state and local tax revenues derived from previously 
 17.1   regulated electric suppliers that will enter the competitive 
 17.2   market and report to the legislature annually how revenues to 
 17.3   the state or local government are changed by restructuring to 
 17.4   competition.  The committees should then recommend legislative 
 17.5   changes to address the establishment of comparable state and 
 17.6   local taxation burdens on all market participants in the supply 
 17.7   of electric power.  Legislation recommended by the committees 
 17.8   should place comparable state and local taxation burdens upon 
 17.9   all market participants. 
 17.10     Sec. 15.  [216E.15] [JURISDICTION AND AUTHORITY.] 
 17.11     Any existing jurisdictional uncertainties must not delay 
 17.12  the implementation of this chapter. 
 17.13     Sec. 16.  [216E.16] [OBLIGATION TO CONNECT.] 
 17.14     Subdivision 1.  [NONDISCRIMINATION.] A local electric 
 17.15  utility is relieved of its traditional obligation to serve but 
 17.16  has an obligation to connect all customers within its service 
 17.17  territory on nondiscriminatory terms and conditions. 
 17.18     Subd. 2.  [CONSUMER SELECTION.] Consumers have the right to 
 17.19  select their source of power supply, and to have 
 17.20  nondiscriminatory access to interconnection with its host LDU, 
 17.21  which utility is required to transport the electricity from the 
 17.22  point of delivery to the host's facilities to the consumer's 
 17.23  location. 
 17.24     Subd. 3.  [DEFAULT SERVICE SUPPLIER.] If a residential 
 17.25  customer, or a customer in any other class or subclass of 
 17.26  customers designated by the commission, fails to make 
 17.27  alternative arrangements for power supply, then the customer's 
 17.28  host LDU shall arrange for supply and services from the default 
 17.29  provider for that LDU. 
 17.30     Sec. 17.  [216E.17] [RECIPROCITY.] 
 17.31     Upon enactment, all intrastate owners and operators of 
 17.32  transmission and distribution facilities have comparable and 
 17.33  reciprocal access to the transmission and distribution customers 
 17.34  of other transmission and distribution facility owners and 
 17.35  operators for the purpose of providing generation services to 
 17.36  those customers.  This section must in no way impede any 
 18.1   transactions involving interstate commerce. 
 18.2      Sec. 18.  [216E.18] [EMINENT DOMAIN.] 
 18.3      The right of eminent domain must not be used to: 
 18.4      (1) deny physical access or interconnection to transmission 
 18.5   or distribution facilities; 
 18.6      (2) restrict the construction of new transmission or 
 18.7   distribution facilities by a qualified party; or 
 18.8      (3) otherwise limit competition. 
 18.9      Sec. 19.  [216E.19] [FAIR DEALING.] 
 18.10     Distribution service providers are subject to: 
 18.11     (1) the jurisdiction of the commission and must be 
 18.12  regulated on the same basis, including but not limited to, 
 18.13  regulation of rates, terms, and conditions; and 
 18.14     (2) uniform tax obligations. 
 18.15     Sec. 20.  [216E.20] [FEDERAL BARRIERS.] 
 18.16     The repeal of PUHCA and PURPA and the reform of other 
 18.17  federal laws that impeded competitive electric markets must be 
 18.18  accomplished to complement Minnesota's plans for the transition 
 18.19  to customer choice.  The process of restructuring generation 
 18.20  services with consumer choice has profound interstate 
 18.21  implications.  Assured reliability of the grid, consumer and 
 18.22  supplier access to sufficiently wide markets, a competitive 
 18.23  playing field free of uneven subsidies and anticompetitive 
 18.24  advantages, and resolution of existing state and federal 
 18.25  jurisdiction over transmission and distribution services are all 
 18.26  essential to workable competition. 
 18.27     Sec. 21.  [216E.21] [CONTRACT RIGHTS.] 
 18.28     Nothing in this chapter may interfere with the rights of 
 18.29  parties under contract. 
 18.30     Sec. 22.  [216E.22] [TRANSMISSION AND DISTRIBUTION 
 18.31  PRICING.] 
 18.32     Subdivision 1.  [GOALS.] To the extent that Minnesota has 
 18.33  jurisdiction over transmission and distribution pricing, the 
 18.34  commission shall encourage pricing mechanisms to enhance 
 18.35  reliability, compensate transmission owners fairly, allow for 
 18.36  widest possible markets, and relieve transmission congestion. 
 19.1      Subd. 2.  [RATES.] The commission shall establish just and 
 19.2   reasonable rates for unbundled local distribution services.  The 
 19.3   rates must provide for costs of providing distribution 
 19.4   services.  Rates must be based upon cost of service or 
 19.5   performance-based incentives combined with other considerations 
 19.6   to promote efficient, safe, and reliable services at the lowest 
 19.7   possible cost. 
 19.8      Subd. 3.  [UNBUNDLED SERVICE TARIFFS.] Each electric 
 19.9   utility shall file unbundled service tariffs to provide 
 19.10  transmission and distribution services to eligible purchasers on 
 19.11  a nondiscriminatory basis. 
 19.12     Subd. 4.  [COMMISSION JURISDICTION.] The commission has 
 19.13  jurisdiction over all aspects of transmission rates and services 
 19.14  not subject to the exclusive jurisdiction of the Federal Energy 
 19.15  Regulatory Commission. 
 19.16     Sec. 23.  [216E.23] [REMEDIES.] 
 19.17     Subdivision 1.  [LIABILITY.] A transmission or distribution 
 19.18  utility is not liable for damages to any current or future 
 19.19  customer if the customer's chosen generation supplier or 
 19.20  provider of unbundled services fails to deliver the service in 
 19.21  accordance with the terms of its bilateral contract with the 
 19.22  customer.  This subdivision must not be applied to relieve 
 19.23  liability arising from the transmission or distribution 
 19.24  utility's own actions or failure to act. 
 19.25     Subd. 2.  [ORDER TO CEASE VIOLATION.] Every retail 
 19.26  customer, market aggregator, or other entity provided 
 19.27  distribution or intrastate transmission service by an electric 
 19.28  utility or LDU in Minnesota has the right to obtain an order 
 19.29  from the commission ordering the electric utility or LDU to 
 19.30  cease any violation of this chapter and to pay all of the 
 19.31  complaining party's costs, including reasonable attorneys' fees. 
 19.32     Sec. 24.  [SUNSET PROVISION.] 
 19.33     The power of the commission to regulate the terms and 
 19.34  conditions of electricity service, including the regulation of 
 19.35  transmission and distribution service and rates, expires ten 
 19.36  years after completion plans are adopted by the state.  At the 
 20.1   time of expiration, the only regulatory authority remaining with 
 20.2   the public utilities commission is to ensure the safety of 
 20.3   electricity service. 
 20.4      Sec. 25.  [TRANSITION PROVISION; NO RATE INCREASE.] 
 20.5      From the effective date of this section to December 31, 
 20.6   2000, no electric utility may increase its rates for electric 
 20.7   service above those charged on the effective date of this 
 20.8   section.  Notwithstanding any provision of Minnesota Statutes, 
 20.9   chapter 216B, an electric utility may decrease electric rates 
 20.10  for a particular customer class prior to December 31, 2000, upon 
 20.11  filing of notice of decrease with the public utilities 
 20.12  commission.  Any losses from such decreases shall not be 
 20.13  considered stranded costs. 
 20.14     Sec. 26.  [SUPERSEDED LAWS.] 
 20.15     All laws in Minnesota Statutes, chapters 216A, 216B, 216C, 
 20.16  and other laws, that are contrary to, or inconsistent with, 
 20.17  sections 1 to 25 are repealed or, to the extent inconsistent, 
 20.18  are superseded by sections 1 to 25. 
 20.19     Sec. 27.  [EFFECTIVE DATE.] 
 20.20     Sections 1 to 26 are effective the day following final 
 20.21  enactment.