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    Subdivision 1. Scope and purpose. This section shall at all times be construed in accordance
with its intent to give the maximum possible encouragement to cogeneration and small power
production consistent with protection of the ratepayers and the public.
    Subd. 2. Applicability. This section as well as any rules promulgated by the commission
to implement this section or the Public Utility Regulatory Policies Act of 1978, Public Law
95-617, Statutes at Large, volume 92, page 3117, and the Federal Energy Regulatory Commission
regulations thereunder, Code of Federal Regulations, title 18, part 292, shall apply to all Minnesota
electric utilities, including cooperative electric associations and municipal electric utilities.
    Subd. 3. Purchases; small facilities. (a) For a qualifying facility having less than 40-kilowatt
capacity, the customer shall be billed for the net energy supplied by the utility according to
the applicable rate schedule for sales to that class of customer. In the case of net input into the
utility system by a qualifying facility having less than 40-kilowatt capacity, compensation to the
customer shall be at a per kilowatt-hour rate determined under paragraph (b) or (c).
(b) In setting rates, the commission shall consider the fixed distribution costs to the utility
not otherwise accounted for in the basic monthly charge and shall ensure that the costs charged to
the qualifying facility are not discriminatory in relation to the costs charged to other customers
of the utility. The commission shall set the rates for net input into the utility system based on
avoided costs as defined in the Code of Federal Regulations, title 18, section 292.101, paragraph
(b)(6), the factors listed in Code of Federal Regulations, title 18, section 292.304, and all other
relevant factors.
(c) Notwithstanding any provision in this chapter to the contrary, a qualifying facility having
less than 40-kilowatt capacity may elect that the compensation for net input by the qualifying
facility into the utility system shall be at the average retail utility energy rate. "Average retail
utility energy rate" is defined as the average of the retail energy rates, exclusive of special rates
based on income, age, or energy conservation, according to the applicable rate schedule of the
utility for sales to that class of customer.
(d) If the qualifying facility is interconnected with a nongenerating utility which has a sole
source contract with a municipal power agency or a generation and transmission utility, the
nongenerating utility may elect to treat its purchase of any net input under this subdivision as
being made on behalf of its supplier and shall be reimbursed by its supplier for any additional
costs incurred in making the purchase. Qualifying facilities having less than 40-kilowatt capacity
may, at the customer's option, elect to be governed by the provisions of subdivision 4.
    Subd. 4. Purchases; wheeling; costs. (a) Except as otherwise provided in paragraph (c), this
subdivision shall apply to all qualifying facilities having 40-kilowatt capacity or more as well as
qualifying facilities as defined in subdivision 3 which elect to be governed by its provisions.
(b) The utility to which the qualifying facility is interconnected shall purchase all energy and
capacity made available by the qualifying facility. The qualifying facility shall be paid the utility's
full avoided capacity and energy costs as negotiated by the parties, as set by the commission,
or as determined through competitive bidding approved by the commission. The full avoided
capacity and energy costs to be paid a qualifying facility that generates electric power by means
of a renewable energy source are the utility's least cost renewable energy facility or the bid of
a competing supplier of a least cost renewable energy facility, whichever is lower, unless the
commission's resource plan order, under section 216B.2422, subdivision 2, provides that the use
of a renewable resource to meet the identified capacity need is not in the public interest.
(c) For all qualifying facilities having 30-kilowatt capacity or more, the utility shall, at the
qualifying facility's or the utility's request, provide wheeling or exchange agreements wherever
practicable to sell the qualifying facility's output to any other Minnesota utility having generation
expansion anticipated or planned for the ensuing ten years. The commission shall establish the
methods and procedures to insure that except for reasonable wheeling charges and line losses, the
qualifying facility receives the full avoided energy and capacity costs of the utility ultimately
receiving the output.
(d) The commission shall set rates for electricity generated by renewable energy.
    Subd. 5. Dispute; resolution. In the event of disputes between an electric utility and a
qualifying facility, either party may request a determination of the issue by the commission. In
any such determination, the burden of proof shall be on the utility. The commission in its order
resolving each such dispute shall require payments to the prevailing party of the prevailing party's
costs, disbursements, and reasonable attorneys' fees, except that the qualifying facility will be
required to pay the costs, disbursements, and attorneys' fees of the utility only if the commission
finds that the claims of the qualifying facility in the dispute have been made in bad faith, or
are a sham, or are frivolous.
    Subd. 6. Rules and uniform contract. (a) The commission shall promulgate rules to
implement the provisions of this section. The commission shall also establish a uniform statewide
form of contract for use between utilities and a qualifying facility having less than 40-kilowatt
(b) The commission shall require the qualifying facility to provide the utility with reasonable
access to the premises and equipment of the qualifying facility if the particular configuration of
the qualifying facility precludes disconnection or testing of the qualifying facility from the utility
side of the interconnection with the utility remaining responsible for its personnel.
(c) The uniform statewide form of contract shall be applied to all new and existing
interconnections established between a utility and a qualifying facility having less than
40-kilowatt capacity, except that existing contracts may remain in force until written notice of
election that the uniform statewide contract form applies is given by either party to the other, with
the notice being of the shortest time period permitted under the existing contract for termination
of the existing contract by either party, but not less than ten nor longer than 30 days.
    Subd. 7.[Repealed, 1994 c 465 art 1 s 27]
    Subd. 8. Interconnection required; obligation for costs. (a) Utilities shall be required to
interconnect with a qualifying facility that offers to provide available energy or capacity and
that satisfies the requirements of this section.
(b) Nothing contained in this section shall be construed to excuse the qualifying facility from
any obligation for costs of interconnection and wheeling in excess of those normally incurred by
the utility for customers with similar load characteristics who are not cogenerators or small power
producers, or from any fixed charges normally assessed such nongenerating customers.
    Subd. 9. Municipal electric utility. For purposes of this section only, except subdivisions
5 and 7, and with respect to municipal electric utilities only, the term "commission" means the
governing body of each municipal electric utility that adopts and has in effect rules implementing
this section which are consistent with the rules adopted by the Minnesota Public Utilities
Commission under subdivision 6. As used in this subdivision, the governing body of a municipal
electric utility means the city council of that municipality; except that, if another board,
commission, or body is empowered by law or resolution of the city council or by its charter to
establish and regulate rates and days for the distribution of electric energy within the service
area of the city, that board, commission, or body shall be considered the governing body of the
municipal electric utility.
History: 1981 c 237 s 1; 1983 c 301 s 166-171; 1984 c 640 s 32; 1991 c 315 s 1; 1993 c 356
s 1; 1996 c 305 art 2 s 38

Official Publication of the State of Minnesota
Revisor of Statutes