1.1                          A bill for an act 
  1.2             relating to utilities; restructuring electric utility 
  1.3             industry; establishing legislative oversight 
  1.4             committee; proposing coding for new law as Minnesota 
  1.5             Statutes, chapter 216E. 
  1.6   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.7      Section 1.  [216E.01] [PURPOSE; FINDINGS.] 
  1.8      Subdivision 1.  [CONSUMER INTERESTS.] The legislature finds 
  1.9   and declares that: 
  1.10     (a) The most compelling reason to restructure the electric 
  1.11  utility industry is to reduce costs for all consumers of 
  1.12  electricity by harnessing the power of competitive markets.  
  1.13     (b) The overall public policy goal of restructuring is to 
  1.14  develop a more efficient industry structure and regulatory 
  1.15  framework that results in a more productive economy by reducing 
  1.16  costs to consumers while maintaining safe and reliable electric 
  1.17  service.  
  1.18     (c) Increased customer choice and the development of 
  1.19  competitive markets for retail electricity services are key 
  1.20  elements in a restructured industry. 
  1.21     (d) This restructured industry will require unbundling of 
  1.22  prices and services and functional separation of centralized 
  1.23  generation services from transmission and distribution services. 
  1.24     (e) Competitive markets will: 
  1.25     (1) have long-term benefits for the economy of the state; 
  2.1      (2) provide electricity suppliers with incentives to 
  2.2   operate efficiently; 
  2.3      (3) create business opportunities; 
  2.4      (4) open markets for new and improved technologies; 
  2.5      (5) provide electricity buyers and sellers with appropriate 
  2.6   price signals; and 
  2.7      (6) improve public confidence in the electric utility 
  2.8   industry. 
  2.9      Subd. 2.  [COMMISSION RESPONSIBILITIES, GENERALLY.] The 
  2.10  following interdependent restructuring policy principles are 
  2.11  binding upon the commission in implementing a statewide electric 
  2.12  utility industry restructuring plan, establishing interim and 
  2.13  permanent transition cost recovery charges, approving each 
  2.14  electric utility's compliance filing, and streamlining 
  2.15  administrative processes to reduce regulation and make it more 
  2.16  efficient. 
  2.17     Sec. 2.  [216E.02] [DEFINITIONS.] 
  2.18     Subdivision 1.  [COMMISSION.] "Commission" means the public 
  2.19  utilities commission. 
  2.20     Subd. 2.  [ELECTRIC UTILITY OR UTILITY.] "Electric utility" 
  2.21  or "utility" means an investor-owned, municipally owned, or 
  2.22  cooperatively owned entity owning or operating facilities for 
  2.23  providing electric service to end-users in this state. 
  2.24     Subd. 3.  [ELECTRICITY SUPPLIER OR SUPPLIER.] "Electricity 
  2.25  supplier" or "supplier" means a supplier of electricity 
  2.26  generation services and includes any actual electricity 
  2.27  generator, broker, aggregator, marketer, or pool that arranges 
  2.28  for the supply of electricity generation to meet retail customer 
  2.29  demand. 
  2.30     Subd. 4.  [TRANSITION COSTS.] (a) "Transition costs" means 
  2.31  those costs, liabilities, regulatory assets, and investments: 
  2.32     (1) that electric utilities would reasonably expect to 
  2.33  recover if the existing regulatory structure with retail rates 
  2.34  for the bundled provision of electric service continued; and 
  2.35     (2) that may not be recovered as a result of implementation 
  2.36  of this chapter, unless a specific mechanism for cost recovery 
  3.1   is provided.  
  3.2      (b) The value of the unrecoverable costs must be equal to 
  3.3   the net difference between the embedded costs of assets 
  3.4   currently recovered through the electric utility's base rates 
  3.5   and the price recoverable for those assets as a result of the 
  3.6   change to a competitive market after the electric utility has 
  3.7   taken all reasonable measures to mitigate transition costs.  
  3.8      (c) Transition costs do not include the cost of investments 
  3.9   made after the effective date of this section. 
  3.10     Sec. 3.  [216E.03] [JURISDICTION.] 
  3.11     The commission has jurisdiction over all electric utilities 
  3.12  within this state for purposes of implementing this chapter. 
  3.13     Sec. 4.  [216E.04] [RESTRUCTURING POLICY PRINCIPLES.] 
  3.14     Subdivision 1.  [COMPETITION.] The legislature declares 
  3.15  that: 
  3.16     (a) Competitive markets are preferred to regulation.  
  3.17     (b) Regulation should serve as a substitute only in those 
  3.18  circumstances where competition cannot provide results that 
  3.19  serve the best interests of all consumers.  
  3.20     (c) Utility services that become subject to effective 
  3.21  competition must be provided on a competitive basis. 
  3.22     (d) Reliable and safe electric service must be maintained 
  3.23  or improved. 
  3.24     Subd. 3.  [CUSTOMER CHOICE.] The legislature finds that to 
  3.25  realize the full benefits of competition, all customers must be 
  3.26  able to choose among and have access to a wide array of 
  3.27  competing suppliers of electricity.  Existing service territory 
  3.28  certification processes must be modified to apply only to the 
  3.29  electric utility transmission and distribution function.  
  3.30  Customers may choose among options such as levels of service 
  3.31  reliability, real time pricing, and generation sources, 
  3.32  including interconnected self-generation.  Customers are 
  3.33  responsible for the consequences of their choices.  The 
  3.34  commission shall ensure that customer confusion is minimized and 
  3.35  customers are well-informed about changes resulting from 
  3.36  restructuring and increased customer choice. 
  4.1      Subd. 4.  [REGULATION AND UNBUNDLING OF SERVICES AND 
  4.2   RATES.] Prior to the time customer choice occurs, electric 
  4.3   utilities shall eliminate cross subsidies among customer classes 
  4.4   and unbundle electric utility generation, transmission, 
  4.5   distribution, and customer services.  All rates and charges, 
  4.6   including taxes, must be unbundled and separately stated on 
  4.7   electric utility bills to provide customers clear price 
  4.8   information on the cost components of generation, transmission, 
  4.9   distribution, and customer services. 
  4.10     Subd. 5.  [ELECTRICITY GENERATION.] Electricity generation 
  4.11  and sales must occur on a competitive basis.  All electricity 
  4.12  suppliers may compete to serve retail customers.  Electricity 
  4.13  generation must be functionally separated from the electric 
  4.14  utility transmission and distribution services.  The 
  4.15  transmission and distribution services will remain regulated. 
  4.16     Subd. 6.  [OPEN ACCESS TO TRANSMISSION AND DISTRIBUTION 
  4.17  FACILITIES.] (a) The legislature finds that customer access to 
  4.18  alternative suppliers of electricity requires open access to the 
  4.19  transmission grid and distribution system and is critical to 
  4.20  creating a fully competitive market structure. 
  4.21     (b) Electric utilities, including all federal, state, and 
  4.22  local public power agencies and cooperatives, shall provide 
  4.23  access to transmission grid and distribution system facilities 
  4.24  and ancillary services on a nondiscriminatory and comparable 
  4.25  basis.  Electric utilities and other companies providing 
  4.26  transmission or distribution services for which open access 
  4.27  tariffs were not required to be filed with the Federal Energy 
  4.28  Regulatory Commission shall file with the commissioner tariffs 
  4.29  that cover these services and that provide nondiscriminatory, 
  4.30  open access transmission and distribution service for all 
  4.31  electricity suppliers and users.  
  4.32     (c) The commission shall monitor electric utilities and 
  4.33  other companies providing transmission or distribution services 
  4.34  and take necessary measures to ensure that no supplier has an 
  4.35  unfair advantage in receiving those services. 
  4.36     Subd. 7.  [OBLIGATION TO CONNECT.] An electric utility is 
  5.1   not required to observe its traditional obligation to serve a 
  5.2   customer who chooses to receive the electric commodity from 
  5.3   another electricity supplier.  When this happens, the 
  5.4   traditional obligation to serve must be replaced by an 
  5.5   obligation to connect.  Reasonable service initiation rules, 
  5.6   disconnect rules, and facility extension policies approved by 
  5.7   the commission must apply to electric utilities.  Customers who 
  5.8   no longer purchase the electric commodity from an electric 
  5.9   utility and who subsequently are not adequately supplied by the 
  5.10  market because they are unable to obtain or retain electric 
  5.11  service from nonregulated electricity suppliers must be served 
  5.12  by a default electricity supplier chosen by the commission, 
  5.13  pursuant to a voluntary, open bid process, to serve this market. 
  5.14     Subd. 8.  [BENEFITS FOR CUSTOMERS.] Restructuring of the 
  5.15  electric utility industry must be implemented in a manner that 
  5.16  benefits all consumers.  Costs must not be shifted unfairly 
  5.17  among customers. 
  5.18     Subd. 9.  [FULL AND FAIR COMPETITION.] Competition among 
  5.19  electric suppliers and buyers must be fair, nondiscriminatory, 
  5.20  and consistent.  In order to ensure fair, nondiscriminatory, and 
  5.21  consistent competition, all competitors must be subject to the 
  5.22  same legal, financial, regulatory, and tax treatments.  
  5.23  Subsidies and disparate regulation or legal requirements that 
  5.24  favor certain competitors or disadvantage others must be 
  5.25  eliminated. 
  5.26     Subd. 10.  [RECOVERY OF TRANSITION COSTS.] (a) Utilities 
  5.27  must be allowed to recover a reasonable amount of transition 
  5.28  costs remaining after mitigation measures are taken. 
  5.29     (b) It is the intent of the legislature to provide 
  5.30  appropriate tools and reasonable guidance to the commission in 
  5.31  order to assist it in addressing claims for the recovery of 
  5.32  stranded costs and fulfilling its responsibility to determine 
  5.33  rates that are equitable and in the public interest.  In making 
  5.34  its determinations, the commission shall balance the interests 
  5.35  of ratepayers and utilities during and after the restructuring 
  5.36  process.  In determining the amount of transition costs an 
  6.1   electric utility may recover, the commission may consider 
  6.2   factors such as the extent to which the electric utility has 
  6.3   mitigated its transition costs, the degree to which the 
  6.4   transition costs are known and measurable, the certainty of 
  6.5   recovery of the transition costs, and how the electric utility's 
  6.6   rates compare to the rates of other electric utilities in the 
  6.7   region. 
  6.8      (c) Utilities shall take all reasonable measures to 
  6.9   mitigate transition costs.  Mitigation measures may include, but 
  6.10  are not limited to: 
  6.11     (1) reduction of expenses; 
  6.12     (2) renegotiation of existing contracts; 
  6.13     (3) refinancing of existing debt; and 
  6.14     (4) the sale of uneconomic or surplus assets. 
  6.15     (c) Recovery of transition costs must be through a 
  6.16  collection mechanism established by the commission that is fair 
  6.17  to all customer classes, limited in duration, and consistent 
  6.18  with the promotion of fully competitive markets and with these 
  6.19  principles. 
  6.20     Subd. 11.  [SANCTITY OF CONTRACT.] The rights and 
  6.21  obligations embodied in contractual arrangements are and will be 
  6.22  an indispensable element of an effective competitive power 
  6.23  market and must be preserved. 
  6.24     Subd. 12.  [ENVIRONMENTAL AND SOCIAL POLICY.] (a) The 
  6.25  legislature declares that: 
  6.26     (1) The energy marketplace should not be used as a vehicle 
  6.27  for accomplishing government-mandated, consumer- or 
  6.28  taxpayer-subsidized, or energy-related social or environmental 
  6.29  programs.  
  6.30     (2) These programs should not be incorporated in electric 
  6.31  utility rate structures but should instead be unbundled from 
  6.32  rates.  
  6.33     (3) The costs of these social or environmental programs 
  6.34  should be financed by legislatively enacted separate fees 
  6.35  assessed on all energy users and collected by all energy 
  6.36  providers.  
  7.1      (b) All generation providers within the state shall take 
  7.2   the necessary measures to ensure that the emission rates from 
  7.3   each of their facilities are at or below the emission rates 
  7.4   existing as of the effective date of this section, taking into 
  7.5   account changes in fuel sources that may have occurred. 
  7.6      Subd. 13.  [ADMINISTRATIVE PROCESSES.] The commission shall 
  7.7   adapt its administrative processes to (1) reduce regulation of 
  7.8   the electric industry and make it more efficient, (2) enable 
  7.9   electricity suppliers to adapt to changes in the market in a 
  7.10  timely manner, (3) ensure the market framework for competitive 
  7.11  electric service, to the extent possible, reduces reliance on 
  7.12  administrative processes, and (4) move deliberately to replace 
  7.13  traditional planning mechanisms with market-driven choice as a 
  7.14  means for supplying resource needs. 
  7.15     Subd. 14.  [TIMETABLE FOR UNBUNDLING.] Electric utilities 
  7.16  shall unbundle rates and services as soon as possible.  The 
  7.17  commission shall implement full customer choice among 
  7.18  electricity suppliers in the most expeditious manner possible, 
  7.19  but not later than December 15, 2000. 
  7.20     Sec. 5.  [216E.05] [IMPLEMENTATION.] 
  7.21     Subdivision 1.  [CHOICE.] The commission shall immediately 
  7.22  commence the implementation of choice of electricity suppliers 
  7.23  for electric utility consumers. 
  7.24     Subd. 2.  [PLAN.] (a) Upon the effective date of this 
  7.25  section, the commission shall undertake a generic proceeding to 
  7.26  develop a statewide industry restructuring plan in accordance 
  7.27  with the principles enumerated in sections 216E.01 to 216E.04 
  7.28  and, after public hearings, shall issue a final order no later 
  7.29  than January 1, 1998.  The plan must require that no later than 
  7.30  September 1, 1998, the generation service of an electric utility 
  7.31  will be functionally separated from its transmission and 
  7.32  distribution functions, cross subsidies among customer classes 
  7.33  will be eliminated, and all electric utility services, rates, 
  7.34  and charges will be unbundled.  Electric utility services 
  7.35  include, but are not limited to, meter reading, billing, and 
  7.36  debt collection.  
  8.1      (b) The plan shall provide that no later than December 15, 
  8.2   2000: 
  8.3      (1) consumers of electricity are able to purchase 
  8.4   electricity from any electricity supplier they choose; 
  8.5      (2) purchasers and electricity suppliers have 
  8.6   nondiscriminatory access to electric utility transmission and 
  8.7   distribution systems; 
  8.8      (3) environmental, social, and other government-mandated, 
  8.9   energy-related programs are financed through the state general 
  8.10  fund, or legislatively enacted separate fees assessed on all 
  8.11  energy users and collected by all energy providers; 
  8.12     (4) electricity generation and retail sales occur on a 
  8.13  competitive basis; 
  8.14     (5) sufficient measures are in place to preserve the 
  8.15  integrity, safety, reliability, and quality of electric service 
  8.16  in the state; and 
  8.17     (6) commission regulation of an electric utility service 
  8.18  ends when the commissioner determines that the service has 
  8.19  become subject to effective competition.  In determining whether 
  8.20  a service is subject to effective competition, the commission 
  8.21  shall consider whether a comparable service is available from a 
  8.22  supplier other than the electric utility and whether market 
  8.23  forces are sufficient to ensure just and reasonable rates 
  8.24  without regulation.  
  8.25     (c) In addition, the commission may consider the following 
  8.26  criteria: 
  8.27     (1) the ability or inability of a single provider to 
  8.28  determine or control prices; 
  8.29     (2) the ease with which other providers may enter the 
  8.30  market; 
  8.31     (3) the likelihood that other providers will enter the 
  8.32  market; 
  8.33     (4) the ability to substitute one service for another; and 
  8.34     (5) other relevant considerations. 
  8.35     (d) The plan must also include a program for making 
  8.36  customers aware of their new supplier options.  In its order, 
  9.1   the commission shall establish an interim transition cost 
  9.2   recovery charge for each electric utility as provided in 
  9.3   subdivision 5.  In addition, the commission will prescribe the 
  9.4   range of acceptable alternatives for determining the amount of 
  9.5   transition costs and their recovery methodology. 
  9.6      Subd. 3.  [COMPLIANCE FILINGS.] The commission shall 
  9.7   require all electric utilities to submit compliance filings by 
  9.8   July 1, 1998, which must include tariffs that provide open 
  9.9   access for all electricity suppliers, prohibit favored treatment 
  9.10  of electric utility affiliates, and other information the 
  9.11  commission may require.  The commission shall investigate and 
  9.12  approve compliance filings no later than September 1, 1998, 
  9.13  subject to modification by the commission if necessary, after 
  9.14  public hearing and subject to a finding that the filings are in 
  9.15  the public interest and consistent with the principles 
  9.16  established in this chapter. 
  9.17     Subd. 4.  [TRANSITION COSTS.] The commission shall allow 
  9.18  electric utilities to collect a portion or all of their 
  9.19  transition costs subject to its determination in the context of 
  9.20  a contested proceeding that the recovery is consistent with the 
  9.21  range of acceptable alternatives contained in the statewide 
  9.22  industry restructuring plan, and is consistent with these 
  9.23  interdependent principles.  The burden of proof for any 
  9.24  transition cost recovery claim must be borne by the electric 
  9.25  utility making the claim. 
  9.26     Subd. 5.  [COST RECOVERY CHARGE.] (a) In order to 
  9.27  facilitate the rapid transition to full competition, the 
  9.28  commission is authorized, in its statewide industry 
  9.29  restructuring plan as provided in subdivision 2, to set, without 
  9.30  a contested proceeding, an interim transition cost recovery 
  9.31  charge for each electric utility.  The interim transition cost 
  9.32  recovery charges are effective for two years from the 
  9.33  implementation of electric utility compliance filings and must 
  9.34  be based on the commission's preliminary determination of an 
  9.35  equitable measure of transition cost recovery that is in the 
  9.36  public interest, and is consistent with these interdependent 
 10.1   principles.  The commission shall also consider the potential 
 10.2   for future rate impacts due to possible differences between 
 10.3   interim transition cost recovery charges and charges that may 
 10.4   finally be approved for transition cost recovery. 
 10.5      (b) An electric utility may seek adjustment of the interim 
 10.6   transition cost recovery charge at any time based on severe 
 10.7   financial hardship, as determined by the commission.  The 
 10.8   setting of an interim transition cost recovery charge 
 10.9   establishes no legal, factual, or policy precedent with respect 
 10.10  to the final determination of transition cost recovery by the 
 10.11  commission in a subsequent administrative or judicial proceeding.
 10.12     Subd. 6.  [CONNECTION OBLIGATION; RULES.] An electric 
 10.13  utility is relieved of its traditional obligation to serve a 
 10.14  customer who chooses to receive the electric commodity from 
 10.15  another electricity supplier.  When this happens, the 
 10.16  traditional obligation to serve is replaced by an obligation to 
 10.17  connect.  Reasonable service initiation rules, disconnect rules, 
 10.18  and facility extension policies approved and adopted by the 
 10.19  commission apply to electric utilities. 
 10.20     Subd. 7.  [DEFAULT SUPPLIER; RULES.] The commission shall 
 10.21  arrange for a default electricity supplier for customers who no 
 10.22  longer purchase the electric commodity from the electric utility 
 10.23  that provided them with a service as of the effective date of 
 10.24  this section, and who subsequently are not adequately supplied 
 10.25  by the market because they are unable to obtain or retain 
 10.26  electric service from nonregulated electricity suppliers.  The 
 10.27  commission shall periodically solicit bids from electricity 
 10.28  suppliers for such service at market prices.  The default 
 10.29  electricity supplier selected must be able to receive 
 10.30  reimbursement pursuant to the Low-Income Home Energy Assistance 
 10.31  Act of 1981 [LIHEAA], as amended, other government subsidies, or 
 10.32  the funds collected from a surcharge assessed by the electric 
 10.33  utility on the transmission and distribution system.  The 
 10.34  commission shall adopt rules to implement this section. 
 10.35     Sec. 6.  [216E.06] [OVERSIGHT COMMITTEE; ESTABLISHMENT; 
 10.36  REPORT; MEETINGS.] 
 11.1      Subdivision 1.  [ESTABLISHMENT.] A legislative oversight 
 11.2   committee on electric utility restructuring consisting of eight 
 11.3   members is established.  The oversight committee expires 
 11.4   December 31, 2002. 
 11.5      Subd. 2.  [TERMS.] (a) ....... shall appoint committee 
 11.6   members to an initial term expiring December 31, 1998.  
 11.7   Subsequent terms are for a two-year period expiring on December 
 11.8   31 of even-numbered years.  Members are limited to one term. 
 11.9      (b) A chair must be selected by a majority of the committee 
 11.10  members. 
 11.11     Subd. 3.  [REPORT.] The committee shall provide an annual 
 11.12  report on or before November 1 of each year to the governor, the 
 11.13  legislature, and the commission on the status of electric 
 11.14  utility restructuring. 
 11.15     Subd. 4.  [MEETINGS.] The committee shall meet quarterly or 
 11.16  as often as is necessary to conduct its business. 
 11.17     Subd. 5.  [MILEAGE REIMBURSEMENT.] Members shall receive 
 11.18  mileage when attending to the duties of the committee. 
 11.19     Subd. 6.  [DUTIES.] The committee is responsible for 
 11.20  working with: 
 11.21     (1) the commission to develop any new legislation necessary 
 11.22  to promote electric utility restructuring and retail choice of 
 11.23  electricity suppliers and to propose changes to or 
 11.24  reorganization of existing statutes to be more consistent with 
 11.25  the restructuring principles established in this chapter; and 
 11.26     (2) the commission and other agencies, as necessary, to 
 11.27  implement this chapter and its restructuring principles. 
 11.28     Sec. 7.  [EFFECTIVE DATE.] 
 11.29     Sections 1 to 6 are effective the day following final 
 11.30  enactment.