1.1                          A bill for an act 
  1.2             relating to utilities; requiring study of retail 
  1.3             wheeling and restructuring of the electric utility 
  1.4             industry; establishing an account. 
  1.5   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.6      Section 1.  [SHORT TITLE.] 
  1.7      This act may be cited as the "Retail Transmission of 
  1.8   Electricity Act." 
  1.9      Sec. 2.  [FINDINGS.] 
  1.10     (a) The legislature finds that the business of generating, 
  1.11  transmitting, and selling electricity for ultimate distribution 
  1.12  to consumers within the state is a matter of public interest and 
  1.13  that reasonable, competitive electricity prices are necessary to 
  1.14  promote the public health, safety, and economic welfare.  The 
  1.15  legislature also finds that retail wheeling may provide a basis 
  1.16  for determination of electricity price levels that relies to a 
  1.17  greater extent upon competition than upon regulation.  There are 
  1.18  no apparent insurmountable technical barriers to the 
  1.19  establishment of retail wheeling in the state. 
  1.20     (b) The legislature further finds that the state economy 
  1.21  may be handicapped if it lags behind other states in considering 
  1.22  retail wheeling.  While retail wheeling appears to be a highly 
  1.23  desirable electricity market paradigm, there are significant 
  1.24  uncertainties, some unique to the state that must be taken into 
  1.25  account when determining a state policy for retail wheeling.  
  2.1   Therefore, it is the purpose of this act to provide sufficient 
  2.2   information to legislators so that they may make recommendations 
  2.3   to the legislature regarding legislation for the 1998 session. 
  2.4      (c) The legislature further finds that the state economy 
  2.5   may also benefit from studying the effectiveness of the current 
  2.6   system of regulation of electric utilities, investigating 
  2.7   alternative forms of service, and studying ways of restructuring 
  2.8   the electric utility industry. 
  2.9      Sec. 3.  [RETAIL WHEELING AND RESTRUCTURING STUDY.] 
  2.10     The department of public service is directed to review and 
  2.11  study the issues of retail wheeling and potential restructuring 
  2.12  of the electric utility industry in the state and provide its 
  2.13  report with recommendations to the state legislature by February 
  2.14  1, 1998. 
  2.15     Sec. 4.  [RETAIL WHEELING AND DIRECT ACCESS DEFINED.] 
  2.16     For the purposes of this act, "retail wheeling" or "direct 
  2.17  access" means a commercial transaction arrangement by which a 
  2.18  retail electricity consumer contracts with a remote electric 
  2.19  power supplier to transmit energy through the electrical 
  2.20  distribution system of the local utility to which the customer 
  2.21  is connected.  The local utility physically continues to provide 
  2.22  electric service to the retail consumer, who pays the local 
  2.23  utility a regulated fee for the retail wheeling and distribution 
  2.24  services provided, and also pays the remote supplier for the 
  2.25  electricity in an unregulated market.  The utility will continue 
  2.26  to be compensated by the consumer for any costs it incurs to 
  2.27  facilitate the transaction between the consumer and the remote 
  2.28  electric power supplier. 
  2.29     Sec. 5.  [DUTIES.] 
  2.30     The department is responsible for: 
  2.31     (a) soliciting information and the viewpoints of all 
  2.32  affected and involved parties, which include, but are not 
  2.33  limited to: 
  2.34     (1) the public utilities commission; 
  2.35     (2) investor-owned utilities; 
  2.36     (3) rural electric cooperatives and municipal electric 
  3.1   utilities; 
  3.2      (4) large business electricity consumers; 
  3.3      (5) small business electricity consumers; 
  3.4      (6) residential consumers; 
  3.5      (7) environmental interest groups; 
  3.6      (8) the general public; 
  3.7      (9) legislators; and 
  3.8      (10) regulatory personnel from other states and nations 
  3.9   having enacted or contemplating retail wheeling legislation; 
  3.10     (b) retaining expert consultants or services selected by 
  3.11  the department as necessary to assist in gathering, 
  3.12  interpreting, and summarizing information for presentation in 
  3.13  forms usable to all members of the legislature and to the 
  3.14  citizens of the state; 
  3.15     (c) reviewing regulatory pricing methodologies for the 
  3.16  unbundled costs of necessary transmission and distribution; 
  3.17     (d) reviewing ways to mitigate cross-subsidization among 
  3.18  services and classes of consumers; 
  3.19     (e) reviewing the environmental and conservation-related 
  3.20  effects of retail wheeling; 
  3.21     (f) reviewing the reliability of retail wheeling and the 
  3.22  impact of retail wheeling on electric service quality, 
  3.23  reliability, and adequacy; 
  3.24     (g) reviewing the ability and possible impact of retail 
  3.25  wheeling on rural electric cooperatives and municipal electric 
  3.26  utilities; 
  3.27     (h) reviewing the following relative to retail wheeling: 
  3.28     (1) power dispatch and the impact on regional power agency 
  3.29  operations; 
  3.30     (2) independent power producers and the Public Utility 
  3.31  Regulatory Policies Act of 1978 (PURPA); 
  3.32     (3) demand-side management, integrated resource planning, 
  3.33  and least-cost planning; 
  3.34     (4) regulatory assets; 
  3.35     (5) stranded costs recovery, if recoverable, and how much; 
  3.36     (6) economic impact on the state and differing impacts on 
  4.1   electricity consumers by class; 
  4.2      (7) social costs of deregulation and the fate of present 
  4.3   low-income subsidies; 
  4.4      (8) the need for special rate programs; 
  4.5      (9) suggested public utilities commission generic 
  4.6   ratemaking and rulemaking, which must include the unbundling of 
  4.7   the transmission, distribution, and generation services; 
  4.8      (10) sources of new capacity; 
  4.9      (11) federal laws, including regulations of the Federal 
  4.10  Energy Regulatory Commission; 
  4.11     (12) litigation risks; and 
  4.12     (13) other states' legislation and experience with retail 
  4.13  wheeling; 
  4.14     (i) reviewing the effectiveness of the current system of 
  4.15  regulation of electric utilities; 
  4.16     (j) examining possible alternative forms of regulation and 
  4.17  related restructuring of the electric utility industry in the 
  4.18  state; 
  4.19     (k) reviewing public policy issues relating to 
  4.20  municipalization; 
  4.21     (l) reviewing possible interim measures to foster increased 
  4.22  competition; and 
  4.23     (m) reviewing economic development and retention rate 
  4.24  policy.  
  4.25     Sec. 6.  [ACCOUNT ESTABLISHED.] 
  4.26     The department shall establish an account, which must not 
  4.27  exceed $100,000, in the state treasury.  The account consists of 
  4.28  $100,000 from assessments against the state's electric utilities 
  4.29  made by the public utilities commission pursuant to the 
  4.30  methodology defined in Minnesota Statutes, section 216B.62.  The 
  4.31  fund must be used to pay costs incurred pursuant to section 5. 
  4.32     Sec. 7.  [NEW SECTION; ECONOMIC DEVELOPMENT AND RETENTION 
  4.33  RATES.] 
  4.34     (a) For the purpose of this section: 
  4.35     (1) "economic development rates" means rates implemented to 
  4.36  attract new industrial companies to the state and to encourage 
  5.1   expansion of existing industrial companies that would otherwise 
  5.2   not occur in the state; and 
  5.3      (2) "retention rates" means rates implemented to retain 
  5.4   existing industrial companies that would otherwise leave the 
  5.5   state. 
  5.6      (b) Notwithstanding any other provision of law to the 
  5.7   contrary, the public utilities commission shall establish 
  5.8   procedures for the review and approval of tariffs for electric 
  5.9   service rates that foster economic development and of tariffs 
  5.10  for retention of existing load within the state.  The procedures 
  5.11  must provide that all electric public utilities serving retail 
  5.12  customers may file with the commission generally available rate 
  5.13  schedules for the provision of economic development rates or 
  5.14  retention rates to industrial customers.  
  5.15     (c) The rates must take into consideration eligibility 
  5.16  criteria, the effect on the utility's fixed and variable costs, 
  5.17  the amount of new demand and energy for electric service 
  5.18  involved, the effect on employment within the state, material 
  5.19  adverse competitive impact on existing in-state firms, end-user 
  5.20  participation in conservation programs, and other 
  5.21  state-established economic development enhancement programs.  
  5.22     (d) To ensure fairness in the application of the retention 
  5.23  rate to industrial companies that are not planning to leave the 
  5.24  state, if the commission finds that it is in the public good, 
  5.25  the retention rate may also be offered to a direct competitor of 
  5.26  a company that has qualified for the retention rate.  
  5.27     (e) For the purpose of ratemaking, a utility that adopts a 
  5.28  retention rate is not allowed to recover from other ratepayers 
  5.29  the difference between the regular tariffed rate and the 
  5.30  retention rate unless and only to the extent that the commission 
  5.31  determines that it is in the public interest and equitable to 
  5.32  other ratepayers.  
  5.33     (f) For the purpose of ratemaking, a utility that adopts an 
  5.34  economic development rate is not allowed to recover from other 
  5.35  ratepayers the difference between that regular tariffed rate and 
  5.36  the economic development rate.  In any rate proceeding 
  6.1   subsequent to approval of economic development rates, the 
  6.2   commission shall not impute to the utility's revenue requirement 
  6.3   the difference between the regular tariffed rate and the 
  6.4   economic development rates for those customers who qualify for 
  6.5   the economic development rate. 
  6.6      Sec. 8.  [DURATION OF ECONOMIC DEVELOPMENT AND RETENTION 
  6.7   RATES.] 
  6.8      The rates established pursuant to section 7 shall not be 
  6.9   available after December 31, 2002. 
  6.10     Sec. 9.  [ESTABLISHMENT OF PROCEDURE.] 
  6.11     The commission shall prepare and establish the procedure 
  6.12  set out in section 7 no later than 150 calendar days after the 
  6.13  effective date of section 7. 
  6.14     Sec. 10.  [REPORT BY PUBLIC UTILITIES COMMISSION.] 
  6.15     (a) The commission shall submit an annual report on or 
  6.16  before January 1 for the next five years to the legislature, the 
  6.17  governor, and the consumer advocate. 
  6.18     (b) The report shall include, but is not limited to, the 
  6.19  following: 
  6.20     (1) the number of utilities filing economic development and 
  6.21  retention rates; 
  6.22     (2) the number of customers being served by each utility 
  6.23  under those rates; and 
  6.24     (3) the impact of the economic development and retention 
  6.25  rates on: 
  6.26     (i) the load of each utility; 
  6.27     (ii) the ratepayers of each utility; and 
  6.28     (iii) participating customers to the extent that it can be 
  6.29  determined. 
  6.30     Sec. 11.  [EFFECTIVE DATE.] 
  6.31     Sections 1 to 10 are effective the day following final 
  6.32  enactment.