1.1 	A bill for an act
1.2 	relating to utilities; regulating rate recovery for income taxes; amending 
1.3 	Minnesota Statutes 2004, section 216B.16, by adding a subdivision.
1.4 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.5 	Section 1. Minnesota Statutes 2004, section 216B.16, is amended by adding a 
1.6 	subdivision to read:
1.7 		Subd. 6e.Income taxes. (a) For purposes of setting an allowance in rates for 
1.8 	income or corporate franchise taxes, the commission may base the allowance on an 
1.9 	estimate of what the public utility will pay as a stand-alone taxpaying entity or an estimate 
1.10 	of the tax liability of the public utility if it files tax returns on a consolidated basis with 
1.11 	other related business entities. The commission shall utilize the estimate that it determines 
1.12 	will provide the most accurate estimate of future tax liability.
1.13 	(b) A public utility shall annually file with the commission a statement showing:
1.14 	(1) the amount of income and corporate franchise taxes collected by the utility in 
1.15 	rates in the immediately preceding year; and
1.16 	(2)  the amount of income and corporate franchise taxes it paid in the immediate 
1.17 	preceding year, minus any refunds received.
1.18 	If the commission determines that the amount allowed by the commission for 
1.19 	income and corporate franchise taxes in the public utility's rates for a calendar year 
1.20 	exceeded the amount actually paid for that year, the commission shall order the utility to 
1.21 	refund the excess to ratepayers by credit posted as a separate item on customer bills in 
1.22 	the billing cycle next following the commission's order.
1.23 	(c) A public utility may not receive rate recovery for the cost of payments required 
1.24 	by this section.

2.1 	EFFECTIVE DATE. Paragraph (a) is effective the day following final enactment 
2.2 	and applies to rate hearings pending or commenced on and after that date. Paragraph (b) is 
2.3 	effective the day following final enactment and applies to taxes paid in 2005 and thereafter.

2.4 	Sec. 2. RETROACTIVE APPLICATION.
 2.5 	The Public Utilities Commission, by July 1, 2006, shall request from each public 
2.6 	utility for which the commission set customer rates a report containing the information 
2.7 	described in section 1, paragraph (b), for calendar years 2002, 2003, and 2004. The public 
2.8 	utility shall provide each requested report by September 30, 2006.
2.9 	If the commission determines that the amount allowed by the commission for 
2.10 	income and corporate franchise taxes in the public utility's rates for a calendar year 
2.11 	exceeded the amount actually paid for that year, the commission shall order the utility to 
2.12 	refund the excess to ratepayers by a credit posted as a separate item on customer bills in 
2.13 	the billing cycle next following the commission's order. A public utility may not recover 
2.14 	in its rates for the cost of payments required by this section.

2.15 	EFFECTIVE DATE. This section is effective retroactively from January 1, 2002.