1.1    .................... moves to amend H. F. No. 436 as follows:
1.2Delete everything after the enacting clause and insert:


1.5    Section 1. TITLE.
1.6    This act may be cited as the Next Generation Energy Act of 2007.

1.7    Sec. 2. Minnesota Statutes 2006, section 216C.05, is amended to read:
1.8216C.05 FINDINGS AND PURPOSE.
1.9    Subdivision 1. Energy planning. The legislature finds and declares that continued
1.10growth in demand for energy will cause severe social and economic dislocations, and that
1.11the state has a vital interest in providing for: increased efficiency in energy consumption,
1.12the development and use of renewable energy resources wherever possible, and the
1.13creation of an effective energy forecasting, planning, and education program.
1.14    The legislature further finds and declares that the protection of life, safety, and
1.15financial security for citizens during an energy crisis is of paramount importance.
1.16    Therefore, the legislature finds that it is in the public interest to review, analyze, and
1.17encourage those energy programs that will minimize the need for annual increases in
1.18fossil fuel consumption by 1990 and the need for additional electrical generating plants,
1.19and provide for an optimum combination of energy sources consistent with environmental
1.20protection and the protection of citizens.
1.21    The legislature intends to monitor, through energy policy planning and
1.22implementation, the transition from historic growth in energy demand to a period when
1.23demand for traditional fuels becomes stable and the supply of renewable energy resources
1.24is readily available and adequately utilized.
1.25    Subd. 2. Energy policy goals. It is the energy policy of the state of Minnesota that:
2.1    (1) the per capita use of fossil fuel as an energy input be reduced by 15 percent by
2.2the year 2015, through increased reliance on energy efficiency and renewable energy
2.3alternatives; and
2.4    (2) 25 percent of the total energy used in the state be derived from renewable energy
2.5resources by the year 2025.


2.8    Section 1. Minnesota Statutes 2006, section 216B.16, subdivision 1, is amended to read:
2.9    Subdivision 1. Notice. Unless the commission otherwise orders, no public utility
2.10shall change a rate which has been duly established under this chapter, except upon 60
2.11days' notice to the commission. The notice shall include statements of facts, expert
2.12opinions, substantiating documents, and exhibits, supporting the change requested, and
2.13state the change proposed to be made in the rates then in force and the time when the
2.14modified rates will go into effect. If the filing utility does not have an approved energy
2.15conservation improvement plan on file with the department, it shall also include in its
2.16notice an energy conservation plan pursuant to section 216B.241. A filing utility subject to
2.17rate regulation under section 216B.026 shall reference in its notice the energy conservation
2.18improvement plans of the generation and transmission cooperative providing energy
2.19conservation improvement programs to members of the filing utility pursuant to section
2.20216B.241. The filing utility shall give written notice, as approved by the commission, of
2.21the proposed change to the governing body of each municipality and county in the area
2.22affected. All proposed changes shall be shown by filing new schedules or shall be plainly
2.23indicated upon schedules on file and in force at the time.

2.24    Sec. 2. Minnesota Statutes 2006, section 216B.16, subdivision 6b, is amended to read:
2.25    Subd. 6b. Energy conservation improvement. (a) Except as otherwise provided
2.26in this subdivision, all investments and expenses of a public utility as defined in
2.27section 216B.241, subdivision 1, paragraph (e) (i), incurred in connection with energy
2.28conservation improvements shall be recognized and included by the commission in the
2.29determination of just and reasonable rates as if the investments and expenses were directly
2.30made or incurred by the utility in furnishing utility service.
2.31    (b) After December 31, 1999, Investments and expenses for energy conservation
2.32improvements shall not be included by the commission in the determination of (i) just and
2.33reasonable electric and gas rates for retail electric and gas service provided to large electric
2.34customer facilities that have been exempted by the commissioner of the department
2.35pursuant to section 216B.241, subdivision 1a, paragraph (b); or (ii) just and reasonable
2.36gas rates for large energy facilities. However, no public utility shall be prevented from
3.1recovering its investment in energy conservation improvements from all customers that
3.2were made on or before December 31, 1999, in compliance with the requirements of
3.3section 216B.241.
3.4    (c) The commission may permit a public utility to file rate schedules providing for
3.5annual recovery of the costs of energy conservation improvements. These rate schedules
3.6may be applicable to less than all the customers in a class of retail customers if necessary to
3.7reflect the differing minimum spending requirements of section 216B.241, subdivision 1a.
3.8After December 31, 1999, The commission shall allow a public utility, without requiring
3.9a general rate filing under this section, to reduce the electric and gas rates applicable to
3.10large electric customer facilities that have been exempted by the commissioner of the
3.11department pursuant to section 216B.241, subdivision 1a, paragraph (b), and to reduce the
3.12gas rate applicable to a large energy facility by an amount that reflects the elimination
3.13of energy conservation improvement investments or expenditures for those facilities
3.14required on or before December 31, 1999. In the event that the commission has set
3.15electric or gas rates based on the use of an accounting methodology that results in the cost
3.16of conservation improvements being recovered from utility customers over a period of
3.17years, the rate reduction may occur in a series of steps to coincide with the recovery of
3.18balances due to the utility for conservation improvements made by the utility on or before
3.19December 31, 1999 2007.

3.20    Sec. 3. [216B.1636] RECOVERY OF ELECTRIC UTILITY INFRASTRUCTURE
3.21COSTS.
3.22    Subdivision 1. Definitions. (a) "Electric utility" means a public utility as defined in
3.23section 216B.02, subdivision 4, that furnishes electric service to retail customers.
3.24    (b) "Electric utility infrastructure costs" or "EUIC" means costs for electric utility
3.25infrastructure projects that were not included in the electric utility's rate base in its most
3.26recent general rate case.
3.27    (c) "Electric utility infrastructure projects" means projects that:
3.28    (1) replace or modify existing electric utility infrastructure, including utility-owned
3.29buildings, if the replacement or modification is shown to conserve energy or use energy
3.30more efficiently, consistent with section 216B.241, subdivision 1c; or
3.31    (2) conserve energy or use energy more efficiently by using waste heat recovery
3.32converted into electricity as defined in section 216B.241, subdivision 1, paragraph (n).
3.33    Subd. 2. Filing. (a) The commission may approve an electric utility's petition for
3.34a rate schedule to recover EUIC under this section. An electric utility may petition the
3.35commission to recover a rate of return, income taxes on the rate of return, incremental
3.36property taxes, if any, plus incremental depreciation expense associated with EUIC.
4.1    (b) The filing is subject to the following:
4.2    (1) an electric utility may submit a filing under this section no more than once
4.3per year; and
4.4    (2) an electric utility must file sufficient information to satisfy the commission
4.5regarding the proposed EUIC or be subject to denial by the commission. The information
4.6includes, but is not limited to:
4.7    (i) the location, description, and costs associated with the project;
4.8    (ii) evidence that the electric utility infrastructure project will conserve energy or use
4.9energy more efficiently than similar utility facilities currently used by the electric utility;
4.10    (iii) the proposed schedule for implementation;
4.11    (iv) a description of the costs, and salvage value, if any, associated with the existing
4.12infrastructure replaced or modified as a result of the project;
4.13    (v) the proposed rate design and an explanation of why the proposed rate design
4.14is in the public interest;
4.15    (vi) the magnitude and timing of any known future electric utility projects that the
4.16utility may seek to recover under this section;
4.17    (vii) the magnitude of EUIC in relation to the electric utility's base revenue as
4.18approved by the commission in the electric utility's most recent general rate case,
4.19exclusive of fuel cost adjustments;
4.20    (viii) the magnitude of EUIC in relation to the electric utility's capital expenditures
4.21since its most recent general rate case;
4.22    (ix) the amount of time since the utility last filed a general rate case and the utility's
4.23reasons for seeking recovery outside of a general rate case;
4.24    (x) documentation supporting the calculation of the EUIC; and
4.25    (xi) a cost and benefit analysis showing that the electric utility infrastructure project
4.26is in the public interest.
4.27Upon approval of the proposed projects and associated EUIC rate schedule, the utility
4.28may implement the electric utility infrastructure projects.
4.29    Subd. 3. Commission authority; orders. The commission may issue orders
4.30necessary to implement and administer this section.

4.31    Sec. 4. [216B.2401] ENERGY CONSERVATION POLICY GOAL.
4.32    It is the energy policy of the state of Minnesota to achieve annual energy savings
4.33equal to 1.5 percent of annual retail energy sales of electricity and natural gas directly
4.34through energy conservation improvement programs and rate design, and indirectly
4.35through energy codes and appliance standards, programs designed to transform the market
4.36or change consumer behavior, energy savings resulting from efficiency improvements to
5.1the utility infrastructure and system, and other efforts to promote energy efficiency and
5.2energy conservation.

5.3    Sec. 5. Minnesota Statutes 2006, section 216B.241, is amended to read:
5.4216B.241 ENERGY CONSERVATION IMPROVEMENT.
5.5    Subdivision 1. Definitions. For purposes of this section and section 216B.16,
5.6subdivision 6b , the terms defined in this subdivision have the meanings given them.
5.7    (a) "Commission" means the Public Utilities Commission.
5.8    (b) "Commissioner" means the commissioner of commerce.
5.9    (c) "Customer facility" means all buildings, structures, equipment, and installations
5.10at a single site.
5.11    (d) "Department" means the Department of Commerce.
5.12    (e) "Energy conservation" means demand-side management of energy supplies
5.13resulting in a net reduction in energy use. Load management that reduces overall energy
5.14use is energy conservation.
5.15    (f) "Energy efficiency" means measures or programs, including energy conservation
5.16measures or programs, that target consumer behavior, equipment, processes, or devices
5.17designed to produce either an absolute decrease in consumption of electric energy or
5.18natural gas or a decrease in consumption of electric energy or natural gas on a per unit
5.19of production basis without a reduction in the quality or level of service provided to
5.20the energy consumer.
5.21    (g) "Energy conservation improvement" means a project that results in energy
5.22efficiency or energy conservation. Energy conservation improvement does not include
5.23waste heat recovery converted into electricity or electric utility infrastructure projects
5.24approved by the commission under section 216B.1636.
5.25    (g) (h) "Gross annual retail energy sales" means annual electric sales to all retail
5.26customers in a utility's or association's Minnesota service territory or natural gas
5.27throughput to all retail customers, including natural gas transportation customers, on a
5.28utility's distribution system in Minnesota. For purposes of this section, gross annual
5.29retail energy sales exclude gas sales to a large energy facility and gas and electric sales
5.30to a large electric customer facility exempted by the commissioner under subdivision
5.311a, paragraph (b).
5.32    (i) "Investments and expenses of a public utility" includes the investments and
5.33expenses incurred by a public utility in connection with an energy conservation
5.34improvement, including but not limited to:
6.1    (1) the differential in interest cost between the market rate and the rate charged on a
6.2no-interest or below-market interest loan made by a public utility to a customer for the
6.3purchase or installation of an energy conservation improvement;
6.4    (2) the difference between the utility's cost of purchase or installation of energy
6.5conservation improvements and any price charged by a public utility to a customer for
6.6such improvements.
6.7    (h) (j) "Large electric customer facility" means a customer facility that imposes a
6.8peak electrical demand on an electric utility's system of not less than 20,000 kilowatts,
6.9measured in the same way as the utility that serves the customer facility measures
6.10electrical demand for billing purposes, and for which electric services are provided at
6.11retail on a single bill by a utility operating in the state.
6.12    (i) (k) "Large energy facility" has the meaning given it in section 216B.2421,
6.13subdivision 2, clause (1).
6.14    (l) "Load management" means an activity, service, or technology to change the
6.15timing or the efficiency of a customer's use of energy that allows a utility or a customer
6.16to respond to wholesale market fluctuations or to reduce the overall peak demand for
6.17energy or capacity.
6.18    (m) "Low income programs" means energy conservation improvement programs
6.19that directly serve the needs of low income persons, including low income renters.
6.20    (n) "Waste heat recovery converted into electricity" means an energy recovery
6.21process that converts otherwise lost energy from the heat of exhaust stacks or pipes used
6.22for engines or manufacturing or industrial processes, or the reduction of high pressure
6.23in water or gas pipelines.
6.24    Subd. 1a. Investment, expenditure, and contribution; public utility. (a) For
6.25purposes of this subdivision and subdivision 2, "public utility" has the meaning given it
6.26in section 216B.02, subdivision 4. Each public utility shall spend and invest for energy
6.27conservation improvements under this subdivision and subdivision 2 the following
6.28amounts:
6.29    (1) for a utility that furnishes gas service, 0.5 percent of its gross operating revenues
6.30from service provided in the state;
6.31    (2) for a utility that furnishes electric service, 1.5 percent of its gross operating
6.32revenues from service provided in the state; and
6.33    (3) for a utility that furnishes electric service and that operates a nuclear-powered
6.34electric generating plant within the state, two percent of its gross operating revenues
6.35from service provided in the state.
7.1    For purposes of this paragraph (a), "gross operating revenues" do not include
7.2revenues from large electric customer facilities exempted by the commissioner under
7.3paragraph (b).
7.4    (b) The owner of a large electric customer facility may petition the commissioner
7.5to exempt both electric and gas utilities serving the large energy customer facility from
7.6the investment and expenditure requirements of paragraph (a) with respect to retail
7.7revenues attributable to the facility. At a minimum, the petition must be supported by
7.8evidence relating to competitive or economic pressures on the customer and a showing
7.9by the customer of reasonable efforts to identify, evaluate, and implement cost-effective
7.10conservation improvements at the facility. If a petition is filed on or before October 1 of
7.11any year, the order of the commissioner to exempt revenues attributable to the facility can
7.12be effective no earlier than January 1 of the following year. The commissioner shall
7.13not grant an exemption if the commissioner determines that granting the exemption is
7.14contrary to the public interest. The commissioner may, after investigation, rescind any
7.15exemption granted under this paragraph upon a determination that cost-effective the
7.16customer is not continuing to make reasonable efforts to identify, evaluate, and implement
7.17energy conservation improvements are available at the large electric customer facility.
7.18For the purposes of this paragraph, "cost-effective" means that the projected total cost of
7.19the energy conservation improvement at the large electric customer facility is less than
7.20the projected present value of the energy and demand savings resulting from the energy
7.21conservation improvement. For the purposes of investigations by the commissioner under
7.22this paragraph, the owner of any large electric customer facility shall, upon request,
7.23provide the commissioner with updated information comparable to that originally supplied
7.24in or with the owner's original petition under this paragraph.
7.25    (c) The commissioner may require investments or spending greater than the amounts
7.26required under this subdivision for a public utility whose most recent advance forecast
7.27required under section 216B.2422 or 216C.17 projects a peak demand deficit of 100
7.28megawatts or greater within five years under midrange forecast assumptions.
7.29    (d) A public utility or owner of a large electric customer facility may appeal
7.30a decision of the commissioner under paragraph (b) or (c) to the commission under
7.31subdivision 2. In reviewing a decision of the commissioner under paragraph (b) or (c),
7.32the commission shall rescind the decision if it finds that the required investments or
7.33spending will:
7.34    (1) not result in cost-effective energy conservation improvements; or
7.35    (2) otherwise not be in the public interest.
8.1    (e) Each utility shall determine what portion of the amount it sets aside for
8.2conservation improvement will be used for conservation improvements under subdivision
8.32 and what portion it will contribute to the energy and conservation account established in
8.4subdivision 2a. A public utility may propose to the commissioner to designate that all
8.5or a portion of funds contributed to the account established in subdivision 2a be used
8.6for research and development projects that can best be implemented on a statewide
8.7basis. Contributions must be remitted to the commissioner by February 1 of each year.
8.8Nothing in this subdivision prohibits a public utility from spending or investing for energy
8.9conservation improvement more than required in this subdivision.
8.10    Subd. 1b. Conservation improvement by cooperative association or
8.11municipality. (a) This subdivision applies to:
8.12    (1) a cooperative electric association that provides retail service to its members;
8.13    (2) a municipality that provides electric service to retail customers; and
8.14    (3) a municipality with gross operating revenues in excess of $5,000,000 from
8.15sales of more than 1,000,000,000 cubic feet in annual throughput sales to natural gas
8.16to retail customers.
8.17    (b) Each cooperative electric association and municipality subject to this subdivision
8.18shall spend and invest for energy conservation improvements under this subdivision
8.19the following amounts:
8.20    (1) for a municipality, 0.5 percent of its gross operating revenues from the sale of
8.21gas and 1.5 percent of its gross operating revenues from the sale of electricity, excluding
8.22gross operating revenues from electric and gas service provided in the state to large
8.23electric customer facilities; and
8.24    (2) for a cooperative electric association, 1.5 percent of its gross operating revenues
8.25from service provided in the state, excluding gross operating revenues from service
8.26provided in the state to large electric customer facilities indirectly through a distribution
8.27cooperative electric association.
8.28    (c) Each municipality and cooperative electric association subject to this subdivision
8.29shall identify and implement energy conservation improvement spending and investments
8.30that are appropriate for the municipality or association, except that a municipality
8.31or association may not spend or invest for energy conservation improvements that
8.32directly benefit a large energy facility or a large electric customer facility for which the
8.33commissioner has issued an exemption under subdivision 1a, paragraph (b).
8.34    (d) Each municipality and cooperative electric association subject to this subdivision
8.35may spend and invest annually up to ten percent of the total amount required to be spent
8.36and invested on energy conservation improvements under this subdivision on research
9.1and development projects that meet the definition of energy conservation improvement
9.2in subdivision 1 and that are funded directly by the municipality or cooperative electric
9.3association.
9.4    (e) Load-management activities that do not reduce energy use but that increase the
9.5efficiency of the electric system may be used to meet 50 percent of the conservation
9.6investment and spending requirements of this subdivision.
9.7    (f) A generation and transmission cooperative electric association that provides
9.8energy services to cooperative electric associations that provide electric service at retail to
9.9consumers may invest in energy conservation improvements on behalf of the associations
9.10it serves and may fulfill the conservation, spending, reporting, and energy savings goals on
9.11an aggregate basis. A municipal power agency or other not-for-profit entity that provides
9.12energy service to municipal utilities that provide electric service at retail may invest in
9.13energy conservation improvements on behalf of the municipal utilities it serves and may
9.14fulfill the conservation, spending, reporting, and energy savings goals on an aggregate
9.15basis, under an agreement between the municipal power agency or not-for-profit entity
9.16and each municipal utility for funding the investments.
9.17    (g) At least every four years, on a schedule determined by the commissioner, each
9.18municipality or cooperative shall file an overview of its conservation improvement plan
9.19with the commissioner. With this overview, Each municipality or cooperative shall file
9.20energy conservation improvement plans by June 1 on a schedule determined by order
9.21of the commissioner, but at least every three years. Plans received by June 1 must be
9.22approved or approved as modified by the commissioner by December 1 of the same year.
9.23The municipality or cooperative shall also provide an evaluation to the commissioner
9.24detailing its energy conservation improvement spending and investments for the previous
9.25period. The evaluation must briefly describe each conservation program and must specify
9.26the energy savings or increased efficiency in the use of energy within the service territory
9.27of the utility or association that is the result of the spending and investments. The
9.28evaluation must analyze the cost-effectiveness of the utility's or association's conservation
9.29programs, using a list of baseline energy and capacity savings assumptions developed
9.30in consultation with the department. The commissioner shall review each evaluation
9.31and make recommendations, where appropriate, to the municipality or association to
9.32increase the effectiveness of conservation improvement activities. Up to three percent of
9.33a utility's conservation spending obligation under this section may be used for program
9.34pre-evaluation, testing, and monitoring and program evaluation. The overview and
9.35evaluation filed by a municipality with less than 60,000,000 kilowatt-hours in annual
9.36retail sales of electric service may consist of a letter from the governing board of the
10.1municipal utility to the department providing the amount of annual conservation spending
10.2required of that municipality and certifying that the required amount has been spent on
10.3conservation programs pursuant to this subdivision.
10.4    (h) The commissioner shall also review each evaluation for whether a portion of the
10.5money spent on residential conservation improvement programs is devoted to programs
10.6that directly address the needs of renters and low-income persons unless an insufficient
10.7number of appropriate programs are available. For the purposes of this subdivision and
10.8subdivision 2, "low-income" means an income at or below 50 percent of the state median
10.9income.
10.10    (i) As part of its spending for conservation improvement, a municipality or
10.11association may contribute to the energy and conservation account. A municipality or
10.12association may propose to the commissioner to designate that all or a portion of funds
10.13contributed to the account be used for research and development projects that can best
10.14be implemented on a statewide basis. Any amount contributed must be remitted to the
10.15commissioner by February 1 of each year.
10.16    (j) (h) A municipality may spend up to 50 percent of its required spending under
10.17this section to refurbish an existing district heating or cooling system. This paragraph
10.18expires until July 1, 2007. From July 1, 2007, through June 30, 2011, expenditures made
10.19to refurbish a district heating or cooling system are considered to be load-management
10.20activities under paragraph (e). This paragraph expires July 1, 2011.
10.21    (i) The commissioner shall consider and may require a utility, association, or
10.22other entity providing energy efficiency and conservation services under this section to
10.23undertake a program suggested by an outside source, including a political subdivision,
10.24nonprofit corporation, or community organization.
10.25    Subd. 1c. Energy-saving goals. (a) The commissioner shall establish energy-saving
10.26goals for energy conservation improvement expenditures and shall evaluate an energy
10.27conservation improvement program on how well it meets the goals set.
10.28    (b) Each individual utility and association shall have an annual energy-savings
10.29goal equivalent to 1.5 percent of gross annual retail energy sales unless modified by the
10.30commissioner under paragraph (d). The savings goals must be calculated based on the
10.31most recent three-year weather normalized average.
10.32    (c) The commissioner must adopt a filing schedule that is designed to have all
10.33utilities and associations operating under an energy savings plan by calendar year 2010.
10.34    (d) In its energy conservation improvement plan filing, a utility or association may
10.35request the commissioner to adjust its annual energy savings percentage goal based on
10.36its historical conservation investment experience, customer class makeup, load growth,
11.1a conservation potential study, or other factors the commissioner determines warrants
11.2an adjustment. The commissioner may not approve a plan that provides for an annual
11.3energy savings goal of less than one percent of gross annual retail energy sales from
11.4energy conservation improvements. A utility or association may include in its energy
11.5conservation plan energy savings from an electric utility infrastructure project or waste
11.6heat recovery converted into electricity project approved by the commission under section
11.7216B.1636 that may count as energy savings in addition to the minimum energy savings
11.8goal of at least one percent for energy conservation improvements. Electric utility
11.9infrastructure projects must result in increased energy efficiency greater than that which
11.10would have occurred through normal maintenance activity.
11.11    (e) An energy savings goal is not satisfied by attaining the revenue expenditure
11.12requirements of subdivisions 1a and 1b, but can only be satisfied by meeting the energy
11.13savings goal established in this subdivision.
11.14    (f) An association or utility is not required to make energy conservation investments
11.15to attain the energy savings goals of this subdivision that are not cost-effective even
11.16if the investment is necessary to attain the energy savings goals. For the purpose of
11.17this paragraph, in determining cost-effectiveness, the commissioner shall consider the
11.18costs and benefits to ratepayers, the utility, participants, and society. In addition, the
11.19commissioner shall consider the rate at which an association or municipal utility is
11.20increasing its energy savings and its expenditures on energy conservation.
11.21    (g) On an annual basis, the commissioner shall produce and make publicly available
11.22a report on the annual energy savings and estimated carbon dioxide reductions achieved
11.23by the energy conservation improvement programs for the two most recent years for
11.24which data is available. The commissioner shall report on program performance both in
11.25the aggregate and for each entity filing an energy conservation improvement plan for
11.26approval or review by the commissioner.
11.27    (h) By January 15, 2010, the commissioner shall report to the legislature whether the
11.28spending requirements under subdivisions 1a and 1b are necessary to achieve the energy
11.29savings goals established in this subdivision.
11.30    Subd. 1d. Cooperative conservation investment increase phase-in Technical
11.31assistance. The increase in required conservation improvement expenditures by a
11.32cooperative electric association that results from the amendments in Laws 2001, chapter
11.33212, article 8, section 6, to subdivision 1b, paragraph (a), clause (1), must be phased
11.34in as follows:
11.35    (1) at least 25 percent shall be effective in year 2002;
11.36    (2) at least 50 percent shall be effective in year 2003;
12.1    (3) at least 75 percent shall be effective in year 2004; and
12.2    (4) all of the increase shall be effective in year 2005 and thereafter.
12.3    The commissioner shall evaluate energy conservation improvement programs
12.4on the basis of cost-effectiveness and the reliability of the technologies employed.
12.5The commissioner shall, by order, establish, maintain and update energy savings
12.6assumptions that must be used when filing energy conservation improvement programs.
12.7The commissioner shall establish an inventory of the most effective energy conservation
12.8programs, techniques, and technologies, and encourage all Minnesota utilities to
12.9implement them, where appropriate, in their service territories. The commissioner shall
12.10describe these programs in sufficient detail to provide a utility reasonable guidance
12.11concerning implementation. The commissioner shall prioritize the opportunities in
12.12order of potential energy savings and in order of cost-effectiveness. The commissioner
12.13may contract with a third party to carry out any of the commissioner's duties under
12.14this subdivision, and to obtain technical assistance to evaluate the effectiveness of any
12.15conservation improvement program. The commissioner may assess up to $800,000
12.16annually until June 30, 2009, and $450,000 annually thereafter for the purposes of this
12.17subdivision. The assessments must be deposited into the energy and conservation account
12.18created under subdivision 2a. An assessment made under this subdivision is not subject to
12.19the cap on assessments provided by section 216B.62, or any other law.
12.20    Subd. 1e. Applied research and development grants. The commissioner may, by
12.21order, approve and make grants for applied research and development projects of general
12.22applicability that identify new technologies or strategies to maximize energy savings,
12.23improve the effectiveness of energy conservation programs, or document the carbon
12.24dioxide reductions from energy conservation programs. When approving projects, the
12.25commissioner shall consider proposals and comments from utilities and other interested
12.26parties. The commissioner may assess up to $3,600,000 annually for the purposes of this
12.27subdivision. The assessments must be deposited into the energy and conservation account
12.28created under subdivision 2a. An assessment made under this subdivision is not subject to
12.29the cap on assessments provided by section 216B.62, or any other law.
12.30    Subd. 1f. Facilities energy efficiency. (a) The Department of Administration
12.31and the Department of Commerce shall maintain and, as needed, revise the sustainable
12.32building design guidelines developed under section 16B.325.
12.33    (b) The Department of Administration and the Department of Commerce shall
12.34maintain and update the benchmarking tool developed under Laws 2001, chapter 212,
12.35article 1, section 3, so that all public buildings can use the benchmarking tool to maintain
12.36energy use information for the purposes of establishing energy efficiency benchmarks,
13.1tracking building performance and measuring the results of energy efficiency and
13.2conservation improvements.
13.3    (c) The commissioner shall require that utilities include in their conservation
13.4improvement plans programs that facilitate professional engineering verification to qualify
13.5a building as Energy Star-labeled or as Leadership in Energy and Environmental Design
13.6(LEED) certified. The state goal is to achieve certification of 1,000 commercial buildings
13.7as Energy Star-labeled, and 100 commercial buildings as LEED-certified by December
13.831, 2010.
13.9    (d) The commissioner may assess up to $500,000 annually for the purposes of this
13.10subdivision. The assessments must be deposited into the energy and conservation account
13.11created under subdivision 2a. An assessment made under this subdivision is not subject to
13.12the cap on assessments provided by section 216B.62, or any other law.
13.13    Subd. 2. Programs. (a) The commissioner may require public utilities to make
13.14investments and expenditures in energy conservation improvements, explicitly setting
13.15forth the interest rates, prices, and terms under which the improvements must be offered to
13.16the customers. The required programs must cover no more than a four-year three-year
13.17period. Public utilities shall file conservation improvement plans by June 1, on a schedule
13.18determined by order of the commissioner, but at least every four three years. Plans
13.19received by a public utility by June 1 must be approved or approved as modified by the
13.20commissioner by December 1 of that same year. The commissioner shall give special
13.21consideration and encouragement to programs that bring about significant net savings
13.22through the use of energy-efficient lighting. The commissioner shall evaluate the program
13.23on the basis of cost-effectiveness and the reliability of technologies employed. The
13.24commissioner's order must provide to the extent practicable for a free choice, by consumers
13.25participating in the program, of the device, method, material, or project constituting the
13.26energy conservation improvement and for a free choice of the seller, installer, or contractor
13.27of the energy conservation improvement, provided that the device, method, material, or
13.28project seller, installer, or contractor is duly licensed, certified, approved, or qualified,
13.29including under the residential conservation services program, where applicable.
13.30    (b) The commissioner may require a utility to make an energy conservation
13.31improvement investment or expenditure whenever the commissioner finds that the
13.32improvement will result in energy savings at a total cost to the utility less than the cost
13.33to the utility to produce or purchase an equivalent amount of new supply of energy. The
13.34commissioner shall nevertheless ensure that every public utility operate one or more
13.35programs under periodic review by the department.
14.1    (c) Each public utility subject to subdivision 1a may spend and invest annually up to
14.2ten percent of the total amount required to be spent and invested on energy conservation
14.3improvements under this section by the utility on research and development projects
14.4that meet the definition of energy conservation improvement in subdivision 1 and that
14.5are funded directly by the public utility.
14.6    (d) A public utility may not spend for or invest in energy conservation improvements
14.7that directly benefit a large energy facility or a large electric customer facility for which
14.8the commissioner has issued an exemption pursuant to subdivision 1a, paragraph (b). The
14.9commissioner shall consider and may require a utility to undertake a program suggested
14.10by an outside source, including a political subdivision or, a nonprofit corporation, or
14.11community organization.
14.12    (e) The commissioner may, by order, establish a list of programs that may be
14.13offered as energy conservation improvements by a public utility, municipal utility,
14.14cooperative electric association, or other entity providing conservation services pursuant
14.15to this section. The list of programs may include rebates for high-efficiency appliances,
14.16rebates or subsidies for high-efficiency lamps, small business energy audits, and building
14.17recommissioning. The commissioner may, by order, change this list to add or subtract
14.18programs as the commissioner determines is necessary to promote efficient and effective
14.19conservation programs.
14.20    (f) The commissioner shall ensure that a portion of the money spent on residential
14.21conservation improvement programs is devoted to programs that directly address the
14.22needs of renters and low-income persons, in proportion to the amount the utility has
14.23historically spent on such programs based on the most recent three-year average relative to
14.24the utility's total conservation spending under this section, unless an insufficient number of
14.25appropriate programs are available.
14.26    (g) (e) A utility, a political subdivision, or a nonprofit or community organization
14.27that has suggested a program, the attorney general acting on behalf of consumers and
14.28small business interests, or a utility customer that has suggested a program and is not
14.29represented by the attorney general under section 8.33 may petition the commission to
14.30modify or revoke a department decision under this section, and the commission may do
14.31so if it determines that the program is not cost-effective, does not adequately address the
14.32residential conservation improvement needs of low-income persons, has a long-range
14.33negative effect on one or more classes of customers, or is otherwise not in the public
14.34interest. The commission shall reject a petition that, on its face, fails to make a reasonable
14.35argument that a program is not in the public interest.
15.1    (h) (f) The commissioner may order a public utility to include, with the filing of the
15.2utility's proposed conservation improvement plan under paragraph (a), the results of an
15.3independent audit of the utility's conservation improvement programs and expenditures
15.4performed by the department or an auditor with experience in the provision of energy
15.5conservation and energy efficiency services approved by the commissioner and chosen by
15.6the utility. The audit must specify the energy savings or increased efficiency in the use
15.7of energy within the service territory of the utility that is the result of the spending and
15.8investments. The audit must evaluate the cost-effectiveness of the utility's conservation
15.9programs.
15.10    (i) Up to three percent of a utility's conservation spending obligation under this
15.11section may be used for program pre-evaluation, testing, and monitoring and program
15.12audit and evaluation.
15.13    Subd. 2a. Energy and conservation account. The energy and conservation
15.14account is established in the special revenue fund in the state treasury. The commissioner
15.15must deposit money contributed under subdivisions 1a and 1b assessed or contributed
15.16under subdivisions 1d, 1e, 1f, and 7 in the energy and conservation account in the
15.17general special revenue fund. Money in the account is appropriated to the department
15.18for programs designed to meet the energy conservation needs of low-income persons
15.19and to make energy conservation improvements in areas not adequately served under
15.20subdivision 2, including research and development projects included in the definition of
15.21energy conservation improvement in subdivision 1 the purposes of subdivisions 1d, 1e,
15.221f, and 7. Interest on money in the account accrues to the account. Using information
15.23collected under section 216C.02, subdivision 1, paragraph (b), the commissioner must,
15.24to the extent possible, allocate enough money to programs for low-income persons to
15.25assure that their needs are being adequately addressed. The commissioner must request
15.26the commissioner of finance to transfer money from the account to the commissioner of
15.27education for an energy conservation program for low-income persons. In establishing
15.28programs, the commissioner must consult political subdivisions and nonprofit and
15.29community organizations, especially organizations engaged in providing energy and
15.30weatherization assistance to low-income persons. At least one program must address
15.31the need for energy conservation improvements in areas in which a high percentage of
15.32residents use fuel oil or propane to fuel their source of home heating. The commissioner
15.33may contract with a political subdivision, a nonprofit or community organization, a public
15.34utility, a municipality, or a cooperative electric association to implement its programs. The
15.35commissioner may provide grants to any person to conduct research and development
15.36projects in accordance with this section.
16.1    Subd. 2b. Recovery of expenses. The commission shall allow a utility to recover
16.2expenses resulting from a conservation improvement program required by the department
16.3and contributions and assessments to the energy and conservation account, unless the
16.4recovery would be inconsistent with a financial incentive proposal approved by the
16.5commission. The commission shall allow a cooperative electric association subject
16.6to rate regulation under section 216B.026, to recover expenses resulting from energy
16.7conservation improvement programs, load management programs, and assessments
16.8and contributions to the energy and conservation account unless the recovery would be
16.9inconsistent with a financial incentive proposal approved by the commission. In addition,
16.10a utility may file annually, or the Public Utilities Commission may require the utility
16.11to file, and the commission may approve, rate schedules containing provisions for the
16.12automatic adjustment of charges for utility service in direct relation to changes in the
16.13expenses of the utility for real and personal property taxes, fees, and permits, the amounts
16.14of which the utility cannot control. A public utility is eligible to file for adjustment for real
16.15and personal property taxes, fees, and permits under this subdivision only if, in the year
16.16previous to the year in which it files for adjustment, it has spent or invested at least 1.75
16.17percent of its gross revenues from provision of electric service, excluding gross operating
16.18revenues from electric service provided in the state to large electric customer facilities for
16.19which the commissioner has issued an exemption under subdivision 1a, paragraph (b), and
16.200.6 percent of its gross revenues from provision of gas service, excluding gross operating
16.21revenues from gas services provided in the state to large electric customer facilities for
16.22which the commissioner has issued an exemption under subdivision 1a, paragraph (b), for
16.23that year for energy conservation improvements under this section.
16.24    Subd. 2c. Performance incentives. By December 31, 2008, the commission shall
16.25review any incentive plan for energy conservation improvement it has approved under
16.26216B.16, subdivision 6c, and adjust the utility performance incentives to recognize making
16.27progress toward and meeting the energy savings goals established in subdivision 1c.
16.28    Subd. 3. Ownership of energy conservation improvement. An energy
16.29conservation improvement made to or installed in a building in accordance with this
16.30section, except systems owned by the utility and designed to turn off, limit, or vary the
16.31delivery of energy, are the exclusive property of the owner of the building except to the
16.32extent that the improvement is subjected to a security interest in favor of the utility in case
16.33of a loan to the building owner. The utility has no liability for loss, damage or injury
16.34caused directly or indirectly by an energy conservation improvement except for negligence
16.35by the utility in purchase, installation, or modification of the product.
17.1    Subd. 4. Federal law prohibitions. If investments by public utilities in energy
17.2conservation improvements are in any manner prohibited or restricted by federal law
17.3and there is a provision under which the prohibition or restriction may be waived, then
17.4the commission, the governor, or any other necessary state agency or officer shall take
17.5all necessary and appropriate steps to secure a waiver with respect to those public utility
17.6investments in energy conservation improvements included in this section.
17.7    Subd. 5. Efficient lighting program. (a) Each public utility, cooperative electric
17.8association, and municipal utility that provides electric service to retail customers shall
17.9include as part of its conservation improvement activities a program to strongly encourage
17.10the use of fluorescent and high-intensity discharge lamps. The program must include at
17.11least a public information campaign to encourage use of the lamps and proper management
17.12of spent lamps by all customer classifications.
17.13    (b) A public utility that provides electric service at retail to 200,000 or more
17.14customers shall establish, either directly or through contracts with other persons, including
17.15lamp manufacturers, distributors, wholesalers, and retailers and local government units, a
17.16system to collect for delivery to a reclamation or recycling facility spent fluorescent and
17.17high-intensity discharge lamps from households and from small businesses as defined in
17.18section 645.445 that generate an average of fewer than ten spent lamps per year.
17.19    (c) A collection system must include establishing reasonably convenient locations
17.20for collecting spent lamps from households and financial incentives sufficient to encourage
17.21spent lamp generators to take the lamps to the collection locations. Financial incentives
17.22may include coupons for purchase of new fluorescent or high-intensity discharge lamps,
17.23a cash back system, or any other financial incentive or group of incentives designed to
17.24collect the maximum number of spent lamps from households and small businesses that is
17.25reasonably feasible.
17.26    (d) A public utility that provides electric service at retail to fewer than 200,000
17.27customers, a cooperative electric association, or a municipal utility that provides electric
17.28service at retail to customers may establish a collection system under paragraphs (b) and
17.29(c) as part of conservation improvement activities required under this section.
17.30    (e) The commissioner of the Pollution Control Agency may not, unless clearly
17.31required by federal law, require a public utility, cooperative electric association, or
17.32municipality that establishes a household fluorescent and high-intensity discharge lamp
17.33collection system under this section to manage the lamps as hazardous waste as long as
17.34the lamps are managed to avoid breakage and are delivered to a recycling or reclamation
17.35facility that removes mercury and other toxic materials contained in the lamps prior to
17.36placement of the lamps in solid waste.
18.1    (f) If a public utility, cooperative electric association, or municipal utility contracts
18.2with a local government unit to provide a collection system under this subdivision,
18.3the contract must provide for payment to the local government unit of all the unit's
18.4incremental costs of collecting and managing spent lamps.
18.5    (g) All the costs incurred by a public utility, cooperative electric association, or
18.6municipal utility for promotion and collection of fluorescent and high-intensity discharge
18.7lamps under this subdivision are conservation improvement spending under this section.
18.8    Subd. 6. Renewable energy research. (a) A public utility that owns a nuclear
18.9generation facility in the state shall spend five percent of the total amount that utility
18.10is required to spend under this section to support basic and applied research and
18.11demonstration activities at the University of Minnesota Initiative for Renewable Energy
18.12and the Environment for the development of renewable energy sources and technologies.
18.13The utility shall transfer the required amount to the University of Minnesota on or before
18.14July 1 of each year and that annual amount shall be deducted from the amount of money the
18.15utility is required to spend under this section. The University of Minnesota shall transfer
18.16at least ten percent of these funds to at least one rural campus or experiment station.
18.17    (b) Research funded under this subdivision shall include:
18.18    (1) development of environmentally sound production, distribution, and use of
18.19energy, chemicals, and materials from renewable sources;
18.20    (2) processing and utilization of agricultural and forestry plant products and other
18.21bio-based, renewable sources as a substitute for fossil-fuel-based energy, chemicals, and
18.22materials using a variety of means including biocatalysis, biorefining, and fermentation;
18.23    (3) conversion of state wind resources to hydrogen for energy storage and
18.24transportation to areas of energy demand;
18.25    (4) improvements in scalable hydrogen fuel cell technologies; and
18.26    (5) production of hydrogen from bio-based, renewable sources; and sequestration
18.27of carbon.
18.28    (c) Notwithstanding other law to the contrary, the utility may, but is not required to,
18.29spend more than two percent of its gross operating revenues from service provided in this
18.30state under this section or section 216B.2411.
18.31    (d) This subdivision expires June 30, 2008.
18.32    Subd. 7. Low-income programs. (a) The commissioner shall ensure that each
18.33utility and association provides low-income programs. When approving spending and
18.34energy savings goals for low-income programs, the commissioner shall consider historic
18.35spending and participation levels, energy savings for low-income programs, and the
18.36number of low-income persons residing in the utility's service territory. A utility that
19.1furnishes gas service must spend at least 0.2 percent of its gross operating revenue from
19.2residential customers in the state on low-income programs. A utility or association that
19.3furnishes electric service must spend at least 0.1 percent of its gross operating revenue
19.4from residential customers in the state on low-income programs. For a generation and
19.5transmission cooperative association, this requirement shall apply to each association's
19.6members' aggregate gross operating revenue from sale of electricity to residential
19.7customers in the state. Beginning in 2010, a utility or association that furnishes electric
19.8service must spend 0.2 percent of its gross operating revenue from residential customers
19.9in the state on low-income programs.
19.10    (b) To meet the requirements of paragraph (a), a utility or association may contribute
19.11funds to the energy and conservation account. An energy conservation improvement plan
19.12must state the amount, if any, of low-income energy conservation improvement funds the
19.13utility or association will contribute to the energy and conservation account. Contributions
19.14must be remitted to the commissioner by February 1 of each year.
19.15    (c) The commissioner shall establish low-income programs to utilize funds
19.16contributed to the energy and conservation account under paragraph (b). In establishing
19.17low-income programs, the commissioner shall consult political subdivisions, utilities, and
19.18nonprofit and community organizations, especially organizations engaged in providing
19.19energy and weatherization assistance to low-income persons. Money contributed to
19.20the energy and conservation account under paragraph (b) must provide programs for
19.21low-income persons, including low-income renters, in the service territory of the utility or
19.22association providing the funds. The commissioner shall record and report expenditures
19.23and energy savings achieved as a result of low-income programs funded through the
19.24energy and conservation account in the report required under subdivision 1c, paragraph
19.25(g). The commissioner may contract with a political subdivision, nonprofit or community
19.26organization, public utility, municipality, or cooperative electric association to implement
19.27low-income programs funded through the energy and conservation account.
19.28    (d) A utility or association may petition the commissioner to modify its required
19.29spending under paragraph (a) if the utility or association and the commissioner have been
19.30unable to expend the amount required under paragraph (a) for three consecutive years.
19.31    Subd. 8. Assessment. The commission or department may assess utilities subject to
19.32this section in proportion to their respective gross operating revenue from sales of gas or
19.33electric service within the state during the last calendar year to carry out the purposes of
19.34subdivisions 1d, 1e, and 1f. Those assessments are not subject to the cap on assessments
19.35provided by section 216B.62, or any other law.

19.36    Sec. 6. [216B.2412] DECOUPLING OF ENERGY SALES FROM REVENUES.
20.1    Subdivision 1. Definition and purpose. For the purpose of this section,
20.2"decoupling" means a regulatory tool designed to separate a utility's revenue from changes
20.3in energy sales. The purpose of decoupling is to reduce a utility's disincentive to promote
20.4energy efficiency.
20.5    Subd. 2. Decoupling criteria. The commission shall, by order, establish criteria
20.6and standards for decoupling. The commission shall design the criteria and standards to
20.7mitigate the impact on public utilities of the energy savings goals under section 216B.241
20.8without adversely affecting utility ratepayers. In designing the criteria, the commission
20.9shall consider energy efficiency, weather, and cost of capital, among other factors.
20.10    Subd. 3. Pilot programs. The commission shall allow one or more rate-regulated
20.11utilities to participate in a pilot program to assess the merits of a rate-decoupling strategy
20.12to promote energy efficiency and conservation. Each pilot program must utilize the
20.13criteria and standards established in subdivision 2 and be designed to determine whether
20.14a rate-decoupling strategy achieves energy savings. On or before a date established by
20.15the commission, the commission shall require electric and gas utilities that intend to
20.16implement a decoupling program to file a decoupling pilot plan which shall be approved
20.17or approved as modified by the commission. A pilot program may not exceed three years
20.18in length. Any extension beyond three years can only be approved in a general rate case,
20.19unless that decoupling program was previously approved as part of a general rate case.
20.20The commission shall report on the programs annually to the chairs of the house of
20.21representatives and senate committees with primary jurisdiction over energy policy.

20.22    Sec. 7. EFFECTIVE DATE.
20.23    This article is effective July 1, 2007.


20.26    Section 1. Minnesota Statutes 2006, section 123B.65, subdivision 2, is amended to read:
20.27    Subd. 2. Energy efficiency contract. (a) Notwithstanding any law to the contrary,
20.28a school district may enter into a guaranteed energy savings contract with a qualified
20.29provider to significantly reduce energy or operating costs.
20.30    (b) Before entering into a contract under this subdivision, the board shall comply
20.31with clauses (1) to (5).
20.32    (1) The board must seek proposals from multiple qualified providers by publishing
20.33notice of the proposed guaranteed energy savings contract in the board's official newspaper
20.34and in other publications if the board determines that additional publication is necessary to
20.35notify multiple qualified providers.
21.1    (2) The school board must select the qualified provider that best meets the needs of
21.2the board. The board must provide public notice of the meeting at which it will select the
21.3qualified provider.
21.4    (3) The contract between the board and the qualified provider must describe the
21.5methods that will be used to calculate the costs of the contract and the operational and
21.6energy savings attributable to the contract.
21.7    (4) The qualified provider shall issue a report to the board giving a description of all
21.8costs of installations, modifications, or remodeling, including costs of design, engineering,
21.9installation, maintenance, repairs, or debt service, and giving detailed calculations of the
21.10amounts by which energy or operating costs will be reduced and the projected payback
21.11schedule in years.
21.12    (5) The board must provide published notice of the meeting in which it proposes to
21.13award the contract, the names of the parties to the proposed contract, and the contract's
21.14purpose.
21.15    (c) The board must provide a copy of any contract entered into under paragraph (a)
21.16and the report provided under paragraph (b), clause (4), to the commissioner of commerce
21.17within 30 days of the effective date of the contract.

21.18    Sec. 2. Minnesota Statutes 2006, section 216C.31, is amended to read:
21.19216C.31 ENERGY AUDIT PROGRAMS.
21.20    The commissioner shall develop and administer state programs of energy audits of
21.21residential and commercial buildings including those required by United States Code, title
21.2242, sections 8211 to 8222 and sections 8281 to 8284. The commissioner shall continue
21.23to administer the residential energy audit program as originally established under the
21.24provisions of United States Code, title 42, sections 8211 to 8222; through July 1, 1986
21.25irrespective of any prior expiration date provided in United States Code, title 42, section
21.268216. The commissioner may approve temporary programs if they are likely to result
21.27in the installation of as many conservation measures as would have been installed had
21.28the utility met the requirements of United States Code, title 42, sections 8211 to 8222.
21.29The Consumer Services Division and the attorney general may release information on
21.30consumer comments about the operation of the program to the commissioner the training
21.31and qualifications necessary for the auditing of residential and commercial buildings under
21.32the auspices of a program created under section 216B.2412.

21.33    Sec. 3. Minnesota Statutes 2006, section 471.345, subdivision 13, is amended to read:
21.34    Subd. 13. Energy efficiency projects. The following definitions apply to this
21.35subdivision.
22.1    (a) "Energy conservation measure" means a training program or facility alteration
22.2designed to reduce energy consumption or operating costs and includes:
22.3    (1) insulation of the building structure and systems within the building;
22.4    (2) storm windows and doors, caulking or weatherstripping, multiglazed windows
22.5and doors, heat absorbing or heat reflective glazed and coated window and door
22.6systems, additional glazing, reductions in glass area, and other window and door system
22.7modifications that reduce energy consumption;
22.8    (3) automatic energy control systems;
22.9    (4) heating, ventilating, or air conditioning system modifications or replacements;
22.10    (5) replacement or modifications of lighting fixtures to increase the energy efficiency
22.11of the lighting system without increasing the overall illumination of a facility, unless an
22.12increase in illumination is necessary to conform to the applicable state or local building
22.13code for the lighting system after the proposed modifications are made;
22.14    (6) energy recovery systems;
22.15    (7) cogeneration systems that produce steam or forms of energy such as heat, as well
22.16as electricity, for use primarily within a building or complex of buildings;
22.17    (8) energy conservation measures that provide long-term operating cost reductions.
22.18    (b) "Guaranteed energy savings contract" means a contract for the evaluation
22.19and recommendations of energy conservation measures, and for one or more energy
22.20conservation measures. The contract must provide that all payments, except obligations
22.21on termination of the contract before its expiration, are to be made over time, but not to
22.22exceed 15 years from the date of final installation, and the savings are guaranteed to the
22.23extent necessary to make payments for the systems.
22.24    (c) "Qualified provider" means a person or business experienced in the design,
22.25implementation, and installation of energy conservation measures. A qualified provider
22.26to whom the contract is awarded shall give a sufficient bond to the municipality for its
22.27faithful performance.
22.28    Notwithstanding any law to the contrary, a municipality may enter into a guaranteed
22.29energy savings contract with a qualified provider to significantly reduce energy or
22.30operating costs.
22.31    Before entering into a contract under this subdivision, the municipality shall provide
22.32published notice of the meeting in which it proposes to award the contract, the names of
22.33the parties to the proposed contract, and the contract's purpose.
22.34    Before installation of equipment, modification, or remodeling, the qualified provider
22.35shall first issue a report, summarizing estimates of all costs of installations, modifications,
22.36or remodeling, including costs of design, engineering, installation, maintenance, repairs,
23.1or debt service, and estimates of the amounts by which energy or operating costs will be
23.2reduced.
23.3    A guaranteed energy savings contract that includes a written guarantee that savings
23.4will meet or exceed the cost of energy conservation measures is not subject to competitive
23.5bidding requirements of section 471.345 or other law or city charter. The contract is
23.6not subject to section 123B.52.
23.7    A municipality may enter into a guaranteed energy savings contract with a qualified
23.8provider if, after review of the report, it finds that the amount it would spend on the energy
23.9conservation measures recommended in the report is not likely to exceed the amount
23.10to be saved in energy and operation costs over 15 years from the date of installation if
23.11the recommendations in the report were followed, and the qualified provider provides a
23.12written guarantee that the energy or operating cost savings will meet or exceed the costs
23.13of the system. The guaranteed energy savings contract may provide for payments over
23.14a period of time, not to exceed 15 years.
23.15    A municipality may enter into an installment payment contract for the purchase and
23.16installation of energy conservation measures. The contract must provide for payments
23.17of not less than 1/15 of the price to be paid within two years from the date of the first
23.18operation, and the remaining costs to be paid monthly, not to exceed a 15-year term from
23.19the date of the first operation.
23.20    A municipality entering into a guaranteed energy savings contract shall provide a
23.21copy of the contract and the report from the qualified provider to the commissioner of
23.22commerce within 30 days of the effective date of the contract.
23.23    Guaranteed energy savings contracts may extend beyond the fiscal year in which
23.24they become effective. The municipality shall include in its annual appropriations measure
23.25for each later fiscal year any amounts payable under guaranteed energy savings contracts
23.26during the year. Failure of a municipality to make such an appropriation does not affect
23.27the validity of the guaranteed energy savings contract or the municipality's obligations
23.28under the contracts.

23.29    Sec. 4. Minnesota Statutes 2006, section 504B.161, subdivision 1, is amended to read:
23.30    Subdivision 1. Requirements. In every lease or license of residential premises, the
23.31landlord or licensor covenants:
23.32    (1) that the premises and all common areas are fit for the use intended by the parties;
23.33    (2) to keep the premises in reasonable repair during the term of the lease or license,
23.34except when the disrepair has been caused by the willful, malicious, or irresponsible
23.35conduct of the tenant or licensee or a person under the direction or control of the tenant or
23.36licensee; and
24.1    (3) to make the premises reasonably energy efficient by installing weatherstripping,
24.2caulking, storm windows, and storm doors when any such measure will result in energy
24.3procurement cost savings, based on current and projected average residential energy costs
24.4in Minnesota, that will exceed the cost of implementing that measure, including interest,
24.5amortized over the ten-year period following the incurring of the cost; and
24.6    (4) to maintain the premises in compliance with the applicable health and safety
24.7laws of the state, including the weatherstripping, caulking, storm window, and storm door
24.8energy efficiency standards for renter-occupied residences prescribed by section 216C.27,
24.9subdivisions 1 and 3 , and of the local units of government where the premises are located
24.10during the term of the lease or license, except when violation of the health and safety
24.11laws has been caused by the willful, malicious, or irresponsible conduct of the tenant or
24.12licensee or a person under the direction or control of the tenant or licensee.
24.13    The parties to a lease or license of residential premises may not waive or modify the
24.14covenants imposed by this section.

24.15    Sec. 5. REPEALER.
24.16Minnesota Statutes 2006, sections 216B.165; 216C.27; and 216C.30, subdivision 5,
24.17and Minnesota Rules, parts 7635.0100; 7635.0110; 7635.0120; 7635.0130; 7635.0140;
24.187635.0150; 7635.0160; 7635.0170; 7635.0180; 7635.0200; 7635.0210; 7635.0220;
24.197635.0230; 7635.0240; 7635.0250; 7635.0260; 7635.0300; 7635.0310; 7635.0320;
24.207635.0330; 7635.0340; 7635.0400; 7635.0410; 7635.0420; 7635.0500; 7635.0510;
24.217635.0520; 7635.0530; 7635.0600; 7635.0610; 7635.0620; 7635.0630; 7635.0640;
24.227635.1000; 7635.1010; 7635.1020; 7635.1030; 7655.0100; 7655.0120; 7655.0200;
24.237655.0210; 7655.0220; 7655.0230; 7655.0240; 7655.0250; 7655.0260; 7655.0270;
24.247655.0280; 7655.0290; 7655.0300; 7655.0310; 7655.0320; 7655.0330; 7655.0400;
24.257655.0410; and 7655.0420, are repealed, effective July 1, 2007.

24.26    Sec. 6. EFFECTIVE DATE.
24.27    This article is effective July 1, 2007.


24.30    Section 1. CITATION.
24.31    Sections 1 to 14 may be known as "The Community-Based Energy Development
24.32Act of 2007."

24.33    Sec. 2. Minnesota Statutes 2006, section 216B.1612, is amended to read:
24.34216B.1612 COMMUNITY-BASED ENERGY DEVELOPMENT; TARIFF.
25.1    Subdivision 1. Tariff establishment. A tariff shall be established to optimize local,
25.2regional, and state benefits from wind renewable energy development and to facilitate
25.3widespread development of community-based wind renewable energy projects throughout
25.4Minnesota.
25.5    Subd. 2. Definitions. (a) The terms used in this section have the meanings given
25.6them in this subdivision.
25.7    (b) "C-BED tariff" or "tariff" means a community-based energy development tariff.
25.8    (c) "Qualifying owner" means:
25.9    (1) a Minnesota resident;
25.10    (2) a limited liability company that is organized under the laws of this state chapter
25.11322B and that is made up of members who are Minnesota residents;
25.12    (3) a Minnesota nonprofit organization organized under chapter 317A;
25.13    (4) a Minnesota cooperative association organized under chapter 308A or 308B,
25.14other than including a rural electric cooperative association or a generation and
25.15transmission cooperative on behalf of and at the request of a member distribution utility;
25.16    (5) a Minnesota political subdivision or local government other than including,
25.17but not limited to, a municipal electric utility or a municipal power agency on behalf
25.18of and at the request of a member distribution utility, including, but not limited to, a
25.19county, statutory or home rule charter city, town, school district, or public or private
25.20higher education institution or any other local or regional governmental organization such
25.21as a board, commission, or association; or
25.22    (6) a tribal council.
25.23    (d) "Net present value rate" means a rate equal to the net present value of the
25.24nominal payments to a project divided by the total expected energy production of the
25.25project over the life of its power purchase agreement.
25.26    (e) "Standard reliability criteria" means:
25.27    (1) can be safely integrated into and operated within the utility's grid without causing
25.28any adverse or unsafe consequences; and
25.29    (2) is consistent with the utility's resource needs as identified in its most recent
25.30resource plan submitted under section 216B.2422.
25.31    (f) "Renewable" means a technology listed in section 216B.1691, subdivision 1,
25.32paragraph (a).
25.33    (g) "Community-based energy project" or "C-BED project" means a new wind
25.34renewable energy project that:
25.35    (1) has no single qualifying owner owning more than 15 percent of a C-BED project
25.36that consists of more than two turbines; or
26.1    (2) for C-BED projects of one or two turbines, is owned entirely by one or more
26.2qualifying owners, with at least 51 percent of the total financial benefits over the life of the
26.3project flowing to qualifying owners; and
26.4    (1) provides that at least 51 percent of the total payments made as a direct result of a
26.5power purchase agreement or similar agreement with a utility accrue to:
26.6    (i) qualifying owners, in the form of net cash payments under the power purchase
26.7agreement that amount to no less than 35 percent made over the term of the power
26.8purchase agreement;
26.9    (ii) owners of land upon which a project is sited, in the form of easement or lease
26.10payments;
26.11    (iii) local units of government, in the form of taxes paid under section 272.029; and
26.12    (iv) lenders chartered under section 46.044, in the form of interest paid on C-BED
26.13project debt financed by a lender;
26.14    (2) allows, if the project is a wind energy project consisting of more than two
26.15turbines, no single qualifying owner to own more than 15 percent of the project;
26.16    (3) allows, if the project is a wind energy project, a public entity listed in paragraph
26.17(b), clause (5), except for a municipal utility, to own more than 15 percent of the project;
26.18and
26.19    (3) (4) has a resolution of support adopted by the county board of each county in
26.20which the project is to be located, or in the case of a project located within the boundaries
26.21of a reservation, the tribal council for that reservation.
26.22    Subd. 3. Tariff rate. (a) The tariff described in subdivision 4 must have a rate
26.23schedule that allows for a rate up to a 2.7 cents per kilowatt-hour net present value rate
26.24over the 20-year life of the power purchase agreement. The tariff must provide for a rate
26.25that is higher in the first ten years of the power purchase agreement than in the last ten
26.26years. The discount rate required to calculate the net present value must be the utility's
26.27normal discount rate used for its other business purposes.
26.28    (b) The commission shall consider mechanisms to encourage the aggregation
26.29of C-BED projects.
26.30    (c) The commission shall require that qualifying and nonqualifying owners provide
26.31sufficient security to secure performance under the power purchase agreement, and shall
26.32prohibit the transfer of the C-BED project to a nonqualifying owner during the initial
26.3320 years of the contract.
26.34    Subd. 4. Utilities to offer tariff. By December 1, 2005 2007, each public utility
26.35providing electric service at retail shall file for commission approval a community-based
26.36energy development tariff consistent with subdivision 3. Within 90 days of the
27.1first commission approval order under this subdivision, each municipal power
27.2agency and generation and transmission cooperative electric association shall adopt a
27.3community-based energy development tariff as consistent as possible with subdivision 3.
27.4    Subd. 5. Priority for C-BED projects. (a) A utility subject to section 216B.1691
27.5that needs to construct new generation, or purchase the output from new generation, as
27.6part of its plan to satisfy its good faith objective and standard under that section should
27.7must take reasonable steps to determine if one or more C-BED projects are available that
27.8meet the utility's cost and reliability requirements, applying standard reliability criteria, to
27.9fulfill some or all of the identified need at minimal impact to customer rates.
27.10    Nothing in this section shall be construed to obligate a utility to enter into a power
27.11purchase agreement under a C-BED tariff developed under this section. A utility whose
27.12renewable energy plan has been approved by the commission under section 216B.1645,
27.13subdivision 2a, must negotiate in good faith with developers of C-BED projects that meet
27.14the specifications of this paragraph and whose aggregated capacity is equal to the capacity
27.15of C-BED projects identified in the plan from which the utility intends to purchase energy.
27.16    (b) Each utility shall include in its resource plan submitted under section 216B.2422
27.17a description of its efforts to purchase energy from C-BED projects, including a list of the
27.18projects under contract and the amount of C-BED energy purchased.
27.19    (c) The commission shall consider the efforts and activities of a utility to purchase
27.20energy from C-BED projects when evaluating its good faith effort towards meeting the
27.21renewable energy objective under section 216B.1691.
27.22    (d) A municipal power agency or generation and transmission cooperative must,
27.23when issuing a request for proposals for C-BED projects to satisfy its standard obligation
27.24under section 216B.1691, provide notice to its member distribution utilities that they
27.25may propose, in partnership with other qualifying owners, a C-BED project for the
27.26consideration of the municipal power agency or generation and transmission cooperative.
27.27    Subd. 6. Property owner participation. To the extent feasible, a developer of a
27.28C-BED project must provide, in writing, an opportunity to invest in the C-BED project to
27.29each property owner on whose property a high-voltage transmission line is constructed
27.30that will transmit the energy generated by the C-BED project to market. This subdivision
27.31applies if the property is located and the owner resides in the county where the C-BED
27.32project is located.
27.33    Subd. 7. Other C-BED tariff issues. (a) A community-based project developer
27.34and a utility shall negotiate the rate and power purchase agreement terms consistent with
27.35the tariff established under subdivision 4.
28.1    (b) At the discretion of the developer, a community-based project developer and
28.2a utility may negotiate a power purchase agreement with terms different from the tariff
28.3established under subdivision 4.
28.4    (c) A qualifying owner, or any combination of qualifying owners, may develop a
28.5joint venture project with a nonqualifying wind renewable energy project developer.
28.6However, the terms of the C-BED tariff may only apply to the portion of the energy
28.7production of the total project that is directly proportional to the equity share of the project
28.8owned by the qualifying owners.
28.9    (d) A project that is operating under a power purchase agreement under a C-BED
28.10tariff is not eligible for net energy billing under section 216B.164, subdivision 3, or for
28.11production incentives under section 216C.41.
28.12    (e) A public utility must receive commission approval of a power purchase
28.13agreement for a C-BED tariffed project. The commission shall provide the utility's
28.14ratepayers an opportunity to address the reasonableness of the proposed power purchase
28.15agreement. Unless a party objects to a contract within 30 days of submission of the
28.16contract to the commission the contract is deemed approved.
28.17    Subd. 8. Community energy partnerships. A utility providing electric service
28.18to retail or wholesale customers in Minnesota and an independent power producer may
28.19participate, and is encouraged to participate, in a community-based energy project, as
28.20owner, equity partner, or provider of technical or financial assistance, subject to the limits
28.21specified in this section.
28.22    Subd. 9. C-BED advisory determination. A developer of a proposed project may
28.23request the commissioner of commerce to issue an advisory determination as to whether
28.24the proposed project qualifies as a C-BED project under this section. The request must
28.25be made on a form and under a procedure approved by the commissioner. A positive
28.26advisory determination of the commissioner under this subdivision establishes a rebuttable
28.27presumption that the project qualifies as a C-BED project.

28.28    Sec. 3. Minnesota Statutes 2006, section 216B.1645, is amended by adding a
28.29subdivision to read:
28.30    Subd. 2a. Utility ownership of renewable resources. (a) A utility may construct,
28.31own and operate generation facilities used to satisfy the requirements of section
28.32216B.1691, notwithstanding any competitive resource acquisition process established
28.33under section 216B.2422, subdivision 5.
28.34    (b) In lieu of any competitive resource acquisition process, a utility that owns a
28.35nuclear generation facility and intends to construct, own or operate facilities under this
29.1section must file with the commission on or before March 1, 2008, a renewable energy
29.2plan setting forth the manner in which the utility proposes to meet the requirements of
29.3section 216B.1691, including a proposed schedule for purchasing renewable energy from
29.4C-BED and non-C-BED projects, a proposed schedule of acquisition and construction
29.5of generation facilities and their expected in-service dates, and a proposed transmission
29.6resources associated with the facilities, including a proposed construction schedule and
29.7expected in-service date for any transmission sources that need to be constructed to
29.8deliver the electricity generated by the facilities. The plan must also contain alternative
29.9means of providing the energy generated by the facilities described in the plan, and
29.10must compare the costs of delivering energy from these alternative means and from the
29.11facilities identified in the plan. The utility must update the plan as necessary in its filing
29.12under section 216B.2422.
29.13    (c) The commission must approve the plan unless it determines, after public hearing
29.14and comment, that the plan:
29.15    (1) imposes excessive costs on ratepayers;
29.16    (2) does not reasonably allocate resources among utility-owned generation facilities,
29.17energy purchased from C-BED and non-C-BED projects, and generation facilities selected
29.18in a competitive selection process under section 216B.2422, subdivision 5; or
29.19    (3) does not maximize benefits to Minnesota citizens, as required by section
29.20216B.1691, subdivision 9.
29.21Nothing in this section prohibits a utility from seeking and securing approval from the
29.22commission to implement projects prior to submission of the plan required under this
29.23section.

29.24    Sec. 4. Minnesota Statutes 2006, section 216B.1645, is amended by adding a
29.25subdivision to read:
29.26    Subd. 2b. Cost recovery for owned renewable facilities. (a) A utility may petition
29.27the commission to approve a rate schedule that provides for the automatic adjustment of
29.28charges to recover prudently incurred investments, expenses or costs associated with
29.29facilities constructed, owned, or operated by a utility to satisfy the requirements of section
29.30216B.1691, provided those facilities were previously approved by the commission under
29.31section 216B.2422 or 216B.243. The commission may approve, or approve as modified a
29.32rate schedule that:
29.33    (1) allows a utility to recover directly from customers on a timely basis the costs of
29.34qualifying renewable energy projects, including:
29.35    (i) return on investment;
29.36    (ii) depreciation;
30.1    (iii) ongoing operation and maintenance costs;
30.2    (iv) taxes; and
30.3    (v) costs of transmission and other ancillary expenses directly allocable to
30.4transmitting electricity generated from a project meeting the specifications of this
30.5paragraph;
30.6    (2) provides a current return on construction work in progress, provided that recovery
30.7of these costs from Minnesota ratepayers is not sought through any other mechanism;
30.8    (3) allows recovery of other expenses incurred that are directly related to a renewable
30.9energy project, provided that the utility demonstrates to the commission's satisfaction that
30.10the expenses improve project economics, ensure project implementation, or facilitate
30.11coordination with the development of transmission necessary to transport energy produced
30.12by the project to market;
30.13    (4) allocates recoverable costs appropriately between wholesale and retail customers;
30.14    (5) terminates recovery when costs have been fully recovered or have otherwise
30.15been reflected in a utility's rates.
30.16    (b) A petition filed under this subdivision must include:
30.17    (1) a description of the facilities for which costs are to be recovered;
30.18    (2) an implementation schedule for the facilities;
30.19    (3) the utility's costs for the facilities;
30.20    (4) a description of the utility's efforts to ensure that costs of the facilities are
30.21reasonable and were prudently incurred; and
30.22    (5) a description of the benefits of the project in promoting the development of
30.23renewable energy in a manner consistent with this chapter.

30.24    Sec. 5. [216B.1681] CURTAILMENT PAYMENTS.
30.25    The commission shall, by September 1, 2007, initiate a review of curtailment
30.26payments for wind energy projects to assess whether utilities are unduly discriminating
30.27among project ownership structures in regard to the contractual availability of curtailment
30.28payments.

30.29    Sec. 6. Minnesota Statutes 2006, section 216B.169, is amended to read:
30.30216B.169 RENEWABLE AND HIGH-EFFICIENCY ENERGY RATE
30.31OPTIONS COMMUNITY-BASED ENERGY DEVELOPMENT GREEN PRICING
30.32OPTION.
30.33    Subdivision 1. Definitions. For the purposes of this section, the following terms
30.34have the meanings given them.
30.35    (a) "Utility" means a public utility, municipal utility, or cooperative electric
30.36association providing electric service at retail to Minnesota consumers.
31.1    (b) "Renewable energy" has the meaning given in section 216B.2422, subdivision 1,
31.2paragraph (c) "Eligible energy technology" has the meaning given in section 216B.1691,
31.3subdivision 1.
31.4    (c) "High-efficiency, low-emissions, distributed generation" means a distributed
31.5generation facility of no more than ten megawatts of interconnected capacity that is
31.6certified by the commissioner under subdivision 3 as a high-efficiency, low-emissions
31.7facility "Community-based energy development project" or "C-BED" has the meaning
31.8given in section 216B.1612, subdivision 2, paragraph (g).
31.9    Subd. 2. Renewable and high-efficiency energy rate options C-BED green
31.10pricing programs. (a) Each utility shall offer its customers, and shall advertise
31.11the offer at least annually quarterly, one or more options that allow a customer to
31.12determine that a certain amount of the electricity generated or purchased on behalf of the
31.13customer is renewable energy or energy generated by high-efficiency, low-emissions,
31.14distributed generation such as fuel cells and microturbines fueled by a renewable fuel a
31.15community-based energy development project or is provided through the purchase of
31.16renewable energy credits from a C-BED project.
31.17    (b) Each public utility shall file an implementation plan within 90 days of July 1,
31.182001 2007, to implement paragraph (a).
31.19    (c) Rates charged to customers must be calculated using the utility's cost of acquiring
31.20the energy for the customer and must:
31.21    (1) reflect the difference between the cost of generating or purchasing the renewable
31.22C-BED energy or credits and the cost of generating or purchasing the same amount of
31.23nonrenewable energy or credits from non-C-BED sources; and
31.24    (2) be distributed on a per kilowatt-hour basis among all customers who choose to
31.25participate in the program.
31.26    (d) Implementation of these rate options may reflect a reasonable amount of lead
31.27time necessary to arrange acquisition of the energy. The utility may must acquire the
31.28energy demanded by customers, in whole or in part, through procuring or generating
31.29the renewable C-BED energy directly, or through the purchase of credits from a provider
31.30that has received certification of eligible power supply pursuant to subdivision 3 issued
31.31under the program established by the commission under section 216B.1691, subdivision
31.324, if available. If a utility is not able to arrange an adequate supply of renewable or
31.33high-efficiency C-BED energy or credits to meet its customers' demand under this section,
31.34the utility must file a report with the commission detailing its efforts and reasons for
31.35its failure.
32.1    Subd. 3. Certification and tradeable credits. (a) The commissioner shall certify a
32.2power supply or supplies as eligible to satisfy customer requirements under this section
32.3upon finding:
32.4    (1) the power supply is renewable energy or energy generated by high-efficiency,
32.5low-emissions, distributed generation meets the requirements of section 216B.1612; and
32.6    (2) the sales arrangements of energy from the supplies are such that the power
32.7supply is only sold once to retail consumers.
32.8    (b) To facilitate compliance with this section, the commission may, by order,
32.9establish a program for tradeable credits for eligible power supplies.
32.10    Subd. 4. C-BED logo. (a) The commissioner of commerce shall design or
32.11contract for the design of a logo that qualifying entities may affix to their products and
32.12to advertising for their products that contains the words "100% Minnesota Renewable
32.13Energy." The logo may also contain a standardized pictorial representation or design.
32.14    (b) The commissioner of commerce must certify in writing that an entity is
32.15authorized to use the logo if the commissioner determines that all the electricity consumed
32.16by an applicant is purchased directly, or by purchasing credits from a C-BED project.
32.17The commissioner of commerce must develop forms and procedures to govern the
32.18application and certification processes and the use of the logo by an entity that receives
32.19certification. No person may use the logo without certification from the commissioner.
32.20For the purposes of this subdivision, "qualifying entity" means a person or entity that has
32.21received certification from the commissioner of commerce granting the entity authority to
32.22use the C-BED logo in the manner prescribed by the commissioner.

32.23    Sec. 7. Minnesota Statutes 2006, section 216C.052, is amended to read:
32.24216C.052 RELIABILITY ADMINISTRATOR.
32.25    Subdivision 1. Responsibilities. (a) There is established the position of reliability
32.26administrator in the Public Utilities Commission Department of Commerce. The
32.27administrator shall act as a source of independent expertise and a technical advisor to
32.28the commissioner, the commission and the public on issues related to the reliability of
32.29the electric system. In conducting its work, the administrator shall provide assistance
32.30to the commission commissioner in administering and implementing the commission's
32.31department's duties under sections 216B.1612, 216B.1691, 216B.2422, 216B.2425, and
32.32216B.243 ; chapters 216E, 216F, and 216G; and rules associated with those provisions.
32.33Subject to resource constraints, the reliability administrator may also and shall also:
32.34    (1) model and monitor the use and operation of the energy infrastructure in the
32.35state, including generation facilities, transmission lines, natural gas pipelines, and other
32.36energy infrastructure;
33.1    (2) develop and present to the commission and parties technical analyses of proposed
33.2infrastructure projects, and provide technical advice to the commission;
33.3    (3) present independent, factual, expert, and technical information on infrastructure
33.4proposals and reliability issues at public meetings hosted by the task force, the
33.5Environmental Quality Board, the department, or the commission.
33.6    (b) Upon request and subject to resource constraints, the administrator shall
33.7provide technical assistance regarding matters unrelated to applications for infrastructure
33.8improvements to the task force, the department, or the commission.
33.9    (c) The administrator may not advocate for any particular outcome in a commission
33.10proceeding, but may give technical advice to the commission as to the impact on the
33.11reliability of the energy system of a particular project or projects.
33.12    Subd. 2. Administrative issues. (a) The commission commissioner may select the
33.13administrator who shall serve for a four-year term. The administrator must demonstrate
33.14technical training, expertise or experience in energy reliability issue, andmay not have
33.15been a party or a participant in a commission energy proceeding for at least one year
33.16prior to selection by the commission commissioner. The commission commissioner
33.17shall oversee and direct the work of the administrator, annually review the expenses of
33.18the administrator, and annually approve the budget of the administrator. Pursuant to
33.19commission approval, The administrator may hire staff and may contract for technical
33.20expertise in performing duties when existing state resources are required for other state
33.21responsibilities or when special expertise is required. The salary of the administrator is
33.22governed by section 15A.0815, subdivision 2.
33.23    (b) Costs relating to a specific proceeding, analysis, or project are not general
33.24administrative costs. For purposes of this section, "energy utility" means public utilities,
33.25generation and transmission cooperative electric associations, and municipal power
33.26agencies providing natural gas or electric service in the state.
33.27    (c) The commission Department of Commerce shall pay:
33.28    (1) the general administrative costs of the administrator, not to exceed $1,000,000 in
33.29a fiscal year, and shall assess energy utilities for those administrative costs. These costs
33.30must be consistent with the budget approved by the commission commissioner under
33.31paragraph (a). The commission department shall apportion the costs among all energy
33.32utilities in proportion to their respective gross operating revenues from sales of gas or
33.33electric service within the state during the last calendar year, and shall then render a
33.34bill to each utility on a regular basis; and
33.35    (2) costs relating to a specific proceeding analysis or project and shall render a bill to
33.36the specific energy utility or utilities participating in the proceeding, analysis, or project
34.1directly, either at the conclusion of a particular proceeding, analysis, or project, or from
34.2time to time during the course of the proceeding, analysis, or project.
34.3    (d) For purposes of administrative efficiency, the commission department shall
34.4assess energy utilities and issue bills in accordance with the billing and assessment
34.5procedures provided in section 216B.62, to the extent that these procedures do not
34.6conflict with this subdivision. The amount of the bills rendered by the commission
34.7department under paragraph (c) must be paid by the energy utility into an account in the
34.8special revenue fund in the state treasury within 30 days from the date of billing and is
34.9appropriated to the commission department for the purposes provided in this section.
34.10The commission shall approve or approve as modified a rate schedule providing for the
34.11automatic adjustment of charges to recover amounts paid by utilities under this section.
34.12All amounts assessed under this section are in addition to amounts appropriated to the
34.13commission and the department by other law.
34.14    Subd. 3. Assessment and appropriation. In addition to the amount noted in
34.15subdivision 2, the commission commissioner may assess utilities, using the mechanism
34.16specified in that subdivision, up to an additional $500,000 annually through June 30,
34.172008. The amounts assessed under this subdivision are appropriated to the commission
34.18commissioner, and some or all of the amounts assessed may be transferred to the
34.19commissioner of administration, for the purposes specified in section 16B.325 and Laws
34.202001, chapter 212, article 1, section 3, as needed to implement those sections.
34.21    Subd. 4. Expiration. Subdivisions 1 and 2 expire June 30, 2007 2012. Subdivision
34.223 expires June 30, 2008.

34.23    Sec. 8. [216F.011] SIZE DETERMINATION.
34.24    (a) The total size of a combination of wind energy conversion systems for the
34.25purpose of determining jurisdictional siting authority under sections 216F.01 to 216F.07
34.26must be determined according to this section. The nameplate capacity of one wind energy
34.27conversion system must be combined with the nameplate capacity of any other wind
34.28energy conversion system that is:
34.29    (1) located within five miles of the wind energy conversion system;
34.30    (2) constructed within the same 12 month period as the wind energy conversion
34.31system; and
34.32    (3) exhibits characteristics of being a single development, including but not limited
34.33to ownership structure, an umbrella sales arrangement, shared interconnection, revenue
34.34sharing arrangements, and common debt or equity financing.
35.1    (b) The commissioner shall prepare and make available the necessary forms and
35.2guidance for project developers to make a request for determination. Upon written
35.3request of a project developer, the commissioner of commerce shall provide a written
35.4determination under this section within 30 days of receipt of the request and information
35.5necessary to make a determination. In the case of a dispute, the chair of the Public Utilities
35.6Commission shall determine the total size of the system, and shall draw all reasonable
35.7inferences in favor of combining the systems.
35.8    (c) An application to a county for a permit for a wind energy conversion system is
35.9not complete without a jurisdictional determination made under this section.

35.10    Sec. 9. [216F.08] PERMIT AUTHORITY; ASSUMPTION BY COUNTIES.
35.11    Subdivision 1. Definition. For the purposes of this subdivision, the term
35.12"processing" means:
35.13    (1) the distribution to applicants of application and determination forms provided
35.14by the commission;
35.15    (2) the receipt and examination of completed application forms, and the certification,
35.16in writing, to the commission either that the LWECS for which a permit was issued by the
35.17county will comply with applicable rules and standards, or, if the facility will not comply,
35.18the respects in which a variance is required for the issuance of a permit; and
35.19    (3) rendering to applicants, upon request, assistance for the proper completion of
35.20an application.
35.21    Subd. 2. Counties; processing applications for LWECS site permits. (a) Any
35.22Minnesota county board may, by resolution and upon written notice to the Public Utilities
35.23Commission, assume responsibility for processing applications for permits required
35.24under this chapter for LWECS with a combined nameplate capacity of less than 25,000
35.25kilowatts. The responsibility for permit application processing, if assumed by a county,
35.26may be delegated by the county board to an appropriate county officer or employee.
35.27Processing by a county shall be done in accordance with procedures and processes
35.28established under chapter 394.
35.29    (c) A county board that exercises its option under paragraph (a) and assumes
35.30responsibility for processing applications for permits for LWECS within its borders
35.31is responsible for issuing, denying, modifying, imposing conditions upon, or revoking
35.32permits under the provisions of this section or rules promulgated pursuant to it. The
35.33action of the county board with regard to a permit application is final, subject to appeal as
35.34provided in section 394.27.
35.35    (d) In adopting and enforcing rules or standards under this subdivision, the
35.36commission must cooperate closely with counties and other governmental agencies.
36.1    (e) The commission must work with counties and wind developers to notify and
36.2educate stakeholders with regard to rules or standards under this section at the time such
36.3rules or standards are being developed and adopted and at least every two years thereafter.
36.4    (f) The commission shall, by order, establish general permit standards governing site
36.5permits for LWECS under this section. These general permit standards shall apply both to
36.6permits issued by counties and to permits issued by the commission directly for LWECS
36.7with a combined nameplate capacity of less than 25,000 kilowatts. The order must contain
36.8minimum standards necessary to ensure the protection of human health and safety and
36.9wind resources on adjacent land and must be consistent with the general provisions of wind
36.10permits issued by the commission in the five years prior to enactment of this provision.
36.11    (g) The commission and the commissioner of commerce shall provide technical
36.12assistance to a county with respect to the processing of LWECS site permit applications
36.13by the county.
36.14    (h) A county may adopt by ordinance standards for LWECS that are more stringent
36.15than standards in commission rules or in the commission's permit standards. The
36.16commission, in considering a permit for LWECS in a county that has adopted more
36.17stringent standards, must incorporate and apply those more stringent standards, unless the
36.18commission finds there is good cause not to do so.

36.19    Sec. 10. STATEWIDE STUDY OF DISPERSED GENERATION POTENTIAL.
36.20    Subdivision 1. Definition. "Dispersed generation" means an electric generation
36.21project with a generating capacity between 10 and 40 megawatts that utilizes an eligible
36.22energy technology, as defined in section 216B.1691, subdivision 1, paragraph (a).
36.23    Subd. 2. Study participants. Each electric utility subject to section 216B.1691
36.24must participate collaboratively in conducting a two-phase study of the potential for
36.25dispersed generation projects that can be developed in Minnesota.
36.26    Subd. 3. First phase study content; report. In the first phase of the study,
36.27participants must analyze the impacts of the addition of a total of 600 megawatts of
36.28new dispersed generation projects distributed among the following Minnesota electric
36.29transmission planning zones: the northeast zone, the northwest zone, the southeast
36.30zone, the southwest zone and the west central zone. Study participants must use a
36.31generally accepted 2010 year transmission system model including all transmission
36.32facilities expected to be operating in 2010. The study must take into consideration
36.33regional projected load growth, planned changes in the bulk transmission network and the
36.34long-range transmission conceptual plan being developed under Laws 2007, chapter 3,
36.35section 2. In determining locations for the installation of dispersed generation projects
37.1that consist of wind energy conversion systems, the study should consider, at a minimum,
37.2wind resource availability, existing and contracted wind projects, and current dispersed
37.3generation projects in the Midwest Independent System Operator interconnection queue.
37.4The study must analyze the impacts of individual projects and all projects in aggregate on
37.5the transmission system, and identify specific modifications to the transmission system
37.6necessary to remedy any problems caused by the installation of dispersed generation
37.7projects, including cost estimates for the modifications. The study must analyze the
37.8additional dispersed generation projects connected at the lowest voltage level transmission
37.9that exists in the vicinity of the projected generation sites. A preliminary analysis to
37.10identify transmission system problems must be conducted with the projects installed
37.11at initially selected locations. The technical review committee may, after reviewing
37.12the locations selected for installation, recommend moving the installation sites to new
37.13locations to reduce undesirable transmission system impacts. The commissioner of
37.14commerce must submit a report containing the findings and recommendations of the first
37.15phase of the study to the commission no later than June 15, 2008.
37.16    Subd. 4. Second phase study content; report. In the second phase of the study,
37.17participants must analyze the impacts of an additional total of 600 megawatts of dispersed
37.18generation projects installed among the five transmission planning zones, or a higher total
37.19capacity amount if agreed to by both the utilities and the technical review committee. The
37.20utilities must employ an analysis method similar to that used in the first phase of the study,
37.21and must use the most recent information available, including information developed in
37.22the first phase. The second phase of the study must use a generally accepted 2013 year
37.23transmission system model including all transmission facilities that are expected to be
37.24in-service at that time. The commissioner of commerce must submit a report containing
37.25the findings and recommendations of the second phase of the study to the commission no
37.26later than September 15, 2009.
37.27    Subd. 5. Technical review committee. Prior to the start of the first phase of
37.28the study, the commissioner of commerce shall appoint a technical review committee
37.29consisting of between 10 and 15 individuals with experience and expertise in electric
37.30transmission system engineering, renewable energy generation technology, and dispersed
37.31generation project development, including representatives from the federal Department
37.32of Energy, the Midwest Independent System Operator, and stakeholder interests. The
37.33technical review committee must oversee both phases of the study, and must:
37.34    (1) make recommendations to the utilities regarding the proposed methods and
37.35assumptions to be used in the technical study;
38.1    (2) in conjunction with the appropriate utilities, hold public meetings on each phase
38.2of the study in each electricity transmission planning zone prior to the beginning of each
38.3phase of study, after the impact analysis is completed, and when a draft final report is
38.4available; and
38.5    (3) review the initial and final drafts of the study and make recommendations for
38.6improvement, including with respect to problems associated with the interconnections
38.7among utility systems that may be amenable to solution through cooperation between the
38.8utilities in each zone. During each phase of the study, the technical review committee
38.9may recommend that the installation of dispersed generation projects be moved to new
38.10locations that cause fewer undesirable transmission system impacts.

38.11    Sec. 11. Minnesota Statutes 2006, section 500.30, subdivision 2, is amended to read:
38.12    Subd. 2. Like any conveyance. Any property owner may grant a solar or wind
38.13easement in the same manner and with the same effect as a conveyance of an interest in
38.14real property. The easements shall be created in writing and shall be filed, duly recorded,
38.15and indexed in the office of the recorder of the county in which the easement is granted.
38.16No duly recorded easement shall be unenforceable on account of lack of privity of estate or
38.17privity of contract; such easements shall run with the land or lands benefited and burdened
38.18and shall constitute a perpetual easement, except that an easement may terminate upon the
38.19conditions stated therein or pursuant to the provisions of section 500.20. A wind easement
38.20or lease of wind rights shall also terminate after five years from the date the easement is
38.21created or lease is entered into, if a wind energy project on the property to which the
38.22easement or lease applies does not begin commercial operation within the five year period.
38.23EFFECTIVE DATE.This section is effective the day following final enactment,
38.24and applies to wind easements created and wind rights leases entered into after the
38.25effective date of this section.

38.26    Sec. 12. TRANSFERRING RELIABILITY ADMINISTRATOR
38.27RESPONSIBILITIES.
38.28    All responsibilities, as defined in Minnesota Statutes, section 15.039, subdivision
38.291, held by the Public Utilities Commission relating to the reliability administrator under
38.30Minnesota Statutes, section 216C.052, are transferred to the Minnesota Department of
38.31Commerce under Minnesota Statutes, section 15.039.

38.32    Sec. 13. TRANSMISSION AUTHORITY AND INTERCONNECTION
38.33EVALUATIONS.
38.34    The reliability administrator shall, in consultation with interested stakeholders:
39.1    (1) review the structures, powers and duties for constructing, owning, maintaining
39.2and operating transmission facilities of state transmission authorities established in
39.3Kansas, North Dakota, South Dakota and Wyoming, and evaluate whether the existence of
39.4a similar organization in Minnesota would have the potential to increase the reliability and
39.5efficiency of the electrical grid in the state, hasten the development of needed transmission
39.6lines, accelerate the development of renewable energy projects, especially in rural areas of
39.7the state, and reduce delivered energy costs to Minnesota ratepayers; and
39.8    (2) assess the potential for and barriers to interconnecting dispersed generation
39.9projects to locations on the electric grid where a generator interconnection would not be
39.10subject to the interconnection rules of the Federal Energy Regulatory Commission or the
39.11Midwest Independent System Operator.
39.12No technical or engineering analyses are necessary in order to complete these duties. The
39.13reliability administrator must report its findings and any recommendations to the chairs
39.14of the senate and house committees with jurisdiction over energy policy by February
39.1515, 2008.

39.16    Sec. 14. REPEALER.
39.17Laws 2007, chapter 3, section 3, is repealed.


39.20    Section 1. [216H.001] FINDINGS; CITATION.
39.21    (a) The legislature finds that the state has a vital interest in preventing or mitigating
39.22harms associated with global warming and in reducing Minnesota's greenhouse gas
39.23emissions. The legislature recognizes that substantial reductions in emissions of
39.24greenhouse gases are necessary to avoid dangerous climate changes in the future. The
39.25legislature finds that taking steps to reduce Minnesota's greenhouse gas emissions today
39.26and planning for long-term reductions will reduce the need for more disruptive emission
39.27reductions later, and that to achieve the purposes of this act, all emissions associated
39.28with electricity generated or consumed within the state must be subject to the state's
39.29emissions-reduction goals. The legislature further finds that Minnesota's economy will
39.30benefit by showing leadership in the transition away from climate-damaging technologies
39.31and toward renewable power, biofuels, and energy efficiency. The legislature recognizes
39.32that achieving these ends will only occur by close cooperation with other states and may
39.33require the state to enter into binding agreements with other units of government.
39.34    (b) This chapter may be referred to as the Global Warming Mitigation Act of 2007.

39.35    Sec. 2. [216H.01] DEFINITIONS.
40.1    Subdivision 1. Scope. For the purposes of this chapter, the terms defined in this
40.2section have the meanings given them.
40.3    Subd. 2. Allowance. "Allowance" means limited authorization from a state
40.4regulatory agency to emit up to one ton of carbon dioxide or carbon dioxide equivalent
40.5into the atmosphere. This limited authorization does not constitute a property right.
40.6    Subd. 3. Cap and trade system. "Cap and trade system" means a regulatory system
40.7that imposes a limit on the aggregate air pollutant emissions of a group of sources, requires
40.8those subject to the cap to own an allowance for each ton of the air pollutant emitted, and
40.9allows for market-based trading of those allowances.
40.10    Subd. 4. Carbon dioxide equivalent. "Carbon dioxide equivalent" means the
40.11quantity of a given greenhouse gas multiplied by its global warming potential.
40.12    Subd. 5. Global warming potential. "Global warming potential" means a measure
40.13of the radiative efficiency or heat-absorbing ability of a particular gas relative to that of
40.14carbon dioxide after taking into account the decay rate of each gas, that is, the amount
40.15removed from the atmosphere over a given number of years, relative to that of carbon
40.16dioxide.
40.17    Subd. 6. Greenhouse gas emissions source. "Greenhouse gas emissions source"
40.18means any anthropogenic physical unit or process that releases greenhouse gases into
40.19the atmosphere.
40.20    Subd. 7. Greenhouse gases. "Greenhouse gases" include carbon dioxide, methane,
40.21nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride or any other
40.22chemical that is determined by the Pollution Control Agency to contribute comparably to
40.23global climate change and that is emitted by anthropogenic sources.
40.24    Subd. 8. New large energy facility. "New large energy facility" means a large
40.25energy facility as defined in section 216B.2421 that is not in operation as of January 1,
40.262007, but does not include a facility that (1) uses natural gas as a primary fuel, (2) is
40.27designed to provide peaking, emergency backup, or contingency services, (3) uses a
40.28simple cycle turbine technology, (4) is capable of achieving full load operations within 45
40.29minutes of startup, and (5) has received a certificate of need under section 216B.243.
40.30    Subd. 9. Person. "Person" has the meaning given in section 216E.01.
40.31    Subd. 10. Statewide greenhouse gas emissions. "Statewide greenhouse gas
40.32emissions" means the total annual emissions of greenhouse gases within the state and all
40.33emissions of greenhouse gases from the generation of electricity imported from outside the
40.34state and consumed in Minnesota. Emissions associated with transmission and distribution
41.1line losses are included in this definition. Statewide emissions are expressed in tons of
41.2carbon dioxide equivalent. Carbon dioxide that is injected into geological formations to
41.3prevent its release to the atmosphere in compliance with applicable laws, and emissions
41.4associated with the combustion of fuels other than coal, petroleum, and natural gas are not
41.5counted as contributing to statewide greenhouse gas emissions.
41.6    Subd. 11. Statewide power sector carbon dioxide emissions. "Statewide power
41.7sector carbon dioxide emissions" means the total annual emissions of carbon dioxide from
41.8the generation of electricity within the state and all emissions of carbon dioxide from the
41.9generation of electricity imported from outside the state and consumed in Minnesota.
41.10Emissions associated with transmission and distribution line losses are included in this
41.11definition. Carbon dioxide that is injected into geological formations to prevent its release
41.12to the atmosphere in compliance with applicable laws, and emissions associated with
41.13the combustion of fuels other than coal, petroleum, and natural gas are not counted as
41.14contributing to statewide power sector carbon dioxide emissions.

41.15    Sec. 3. [216H.02] GREENHOUSE GAS EMISSIONS-REDUCTION GOALS.
41.16    It is the state's goal to reduce statewide greenhouse gas emissions to a level at least
41.1715 percent below 2005 emission levels by 2015, to a level at least 30 percent below 2005
41.18emission levels by 2025, and to a level at least 80 percent below 2005 emission levels
41.19by 2050.

41.20    Sec. 4. [216H.04] GREENHOUSE GAS EMISSIONS-REDUCTION PLAN.
41.21    Subdivision 1. Plan for achieving reductions. (a) By February 1, 2008, the
41.22commissioners of the Pollution Control Agency and the Department of Commerce shall
41.23submit a plan to the chairs of the senate and house of representatives committees with
41.24jurisdiction over energy and environmental policy that contains recommendations on how
41.25best to achieve the statewide greenhouse gas emissions-reduction goals established under
41.26section 216H.02. The plan must also identify how best to reduce statewide greenhouse gas
41.27emissions to a level at least 45 percent below 2005 levels by 2025. The plan must identify,
41.28develop, and integrate a full range of greenhouse gas emissions-reduction activities across
41.29all economic sectors, regions, and energy uses in the state, and estimate the costs and
41.30benefits of each action. The plan must:
41.31    (1) estimate statewide greenhouse gas emissions for 2005 and make projections of
41.32statewide greenhouse gas emissions for 2015, 2025, and 2050;
41.33    (2) estimate the statewide greenhouse gas emissions reductions anticipated from
41.34implementation of existing state policies;
41.35    (3) include a cap and trade system as described in subdivision 3;
42.1    (4) recommend additional policies to achieve statewide greenhouse gas
42.2emissions-reduction goals;
42.3    (5) include provisions that will ensure that existing policies are evaluated, and that at
42.4least every five years any policy changes needed to achieve the statewide greenhouse gas
42.5emissions-reduction goals are developed and recommended for legislative action;
42.6    (6) recommend a system to require the reporting of statewide greenhouse gas
42.7emissions, identifying which facilities must report, how emission estimates should be
42.8made, and other reporting requirements that will ensure the collection of emissions
42.9information needed to reliably document statewide greenhouse gas emission levels and
42.10implement the plan; and
42.11    (7) evaluate the option of exempting a project from the prohibitions contained in
42.12section 216H.05, subdivision 1, if the project contributes a specified fee per ton of carbon
42.13dioxide emissions emitted annually by the project, the proceeds of which would be used to
42.14fund permanent, quantifiable, verifiable, and enforceable reductions in greenhouse gas
42.15emissions that would not otherwise have occurred.
42.16    (b) In formulating the plan, the commissioners shall consider the broadest possible
42.17set of mechanisms to reduce emissions, including, but not limited to, expanding the
42.18electric sector cap and trade system established under subdivision 3 to include emissions
42.19sources other than electricity generation and greenhouse gases other than carbon dioxide;
42.20scheduling reductions of the emissions cap; imposing greenhouse gas taxes, fines, and
42.21other penalties; adopting emissions-reduction performance standards for sources of
42.22greenhouse gases; establishing financial or other incentives to promote activities that will
42.23reduce greenhouse gases; and enhancing existing policies that have the effect of lowering
42.24greenhouse gas emissions.
42.25    Subd. 2. Planning process. The plan required under subdivision 1 must be
42.26developed through a structured, broadly inclusive stakeholder-based review of potential
42.27policies and initiatives that can be implemented in Minnesota to reduce greenhouse gas
42.28emissions. The stakeholder-based review process must be conducted by a nationally
42.29recognized independent expert entity. The commissioner of commerce shall coordinate
42.30executive branch participation with this stakeholder process.
42.31    Subd. 3. Cap and trade system. (a) The plan must include a cap and trade system
42.32incorporating, at a minimum, statewide power sector carbon dioxide emissions. The
42.33cap and trade plan must:
42.34    (1) set an emissions cap at an initial level to prevent significant increases in statewide
42.35greenhouse gas emissions above current levels, with a schedule for lowering the cap
42.36periodically to help meet the state's emissions-reduction targets;
43.1    (2) maximize Minnesota's ability to enter into allowance trading relationships with
43.2other states that have established or are in the process of establishing a cap and trade
43.3system regulating greenhouse gas emissions;
43.4    (3) evaluate the feasibility of implementing a cap and trade system that does not
43.5encompass the entire United States, and identify the impacts on the efficiency and
43.6effectiveness of the cap and trade system if restricted to Minnesota alone, if expanded
43.7to include surrounding midwestern states, and if Minnesota were to join other emerging
43.8regional systems with states that are planning to implement a cap and trade system;
43.9    (4) evaluate whether and to what extent a party subject to the cap should receive
43.10credit for offsetting emissions by implementing projects that reduce greenhouse gas
43.11emissions from sources not subject to the cap or absorb and sequester greenhouse gases
43.12from the atmosphere;
43.13    (5) include methods to ensure that all emissions reductions associated with projects
43.14listed in clause (4) are permanent, quantifiable, verifiable, enforceable, and would not
43.15have otherwise occurred;
43.16    (6) be designed to ensure that the proceeds from auctioning allowances are used to
43.17benefit the public, including to help meet the state's emissions-reduction goals in the most
43.18efficient and least disruptive way;
43.19    (7) estimate likely allowance prices under various scenarios, including the impact
43.20on allowance prices of constructing additional power plants subject to the cap and trade
43.21system;
43.22    (8) recommend ways to minimize any rate impacts on energy consumers;
43.23    (9) suggest procedures to award appropriate credit to entities that have voluntarily
43.24reduced their greenhouse gas emissions prior to implementation of the cap and trade
43.25system;
43.26    (10) ensure to the extent practicable that emissions reductions made in this state do
43.27not cause emissions increases outside the state;
43.28    (11) identify technologies and industries likely to thrive in a carbon-constrained
43.29future;
43.30    (12) maximize economic development in rural areas from the development of
43.31renewable energy sources and proven terrestrial sequestration practices; and
43.32    (13) suggest methods to calculate carbon dioxide emissions associated with
43.33electricity imported from outside the state.
43.34    Subd. 4. Regional activities. It shall be an executive branch responsibility to work
43.35with other states in the midwest region to develop and implement a regional approach to
43.36reducing greenhouse gas emissions from activities in the region, including consulting
44.1on expanding the cap and trade system described in subdivision 3. The commissioner
44.2of commerce shall coordinate Minnesota's regional activities under this subdivision
44.3and report to the legislative committees in the senate and house of representatives with
44.4jurisdiction over energy and environmental policy by February 1, 2008, and February 1,
44.52009, on the progress made and recommendations for further action.

44.6    Sec. 5. [216H.05] NO LONG-TERM INCREASE FROM POWER PLANTS.
44.7    Subdivision 1. Long-term increased emissions from power plants prohibited.
44.8    Until the cap and trade system described in section 216H.04, subdivision 3, is fully
44.9implemented, and except as allowed in subdivision 2, no person shall:
44.10    (1) construct within the state a new large energy facility that would contribute to
44.11statewide power sector carbon dioxide emissions;
44.12    (2) import or commit to import from outside the state power from a new large energy
44.13facility that would contribute to statewide power sector carbon dioxide emissions; or
44.14    (3) enter into a new long-term power purchase agreement that would increase
44.15statewide power sector carbon dioxide emissions. For purposes of this section, a long-term
44.16power purchase agreement means an agreement to purchase 50 megawatts of capacity or
44.17more for a term exceeding five years. This prohibition does not apply to an agreement in
44.18effect as of January 1, 2007, nor to the renewal of such an agreement.
44.19    Subd. 2. Exception for facilities that offset emissions. (a) The prohibitions in
44.20subdivision 1 do not apply if the project proponent demonstrates to the Public Utilities
44.21Commission's satisfaction that it will offset the new contribution to statewide power sector
44.22carbon dioxide emissions with a carbon dioxide reduction project identified in paragraph
44.23(b) and in compliance with paragraph (c).
44.24    (b) A project proponent may offset the new contribution to statewide power sector
44.25carbon dioxide emissions in either, or a combination of both, of the following ways:
44.26    (1) by reducing an existing facility's contribution to statewide power sector carbon
44.27dioxide emissions in an amount equal to or greater than the proposed new contribution to
44.28statewide power sector carbon dioxide emissions; or
44.29    (2) by purchasing carbon dioxide allowances from a state or group of states that
44.30has a mandatory carbon dioxide cap and trade system in place that produces verifiable
44.31emissions reductions.
44.32    (c) The Public Utilities Commission shall not find that a proposed carbon dioxide
44.33reduction project identified in paragraph (b) acceptably offsets a new contribution
44.34to statewide power sector carbon dioxide emissions unless the proposed offsets are
44.35permanent, quantifiable, verifiable, enforceable, and would not have otherwise occurred.
44.36Emissions that have been offset under this subdivision and emissions exempted under
45.1subdivision 3 continue to be subject to the requirements of the cap and trade system
45.2described in section 216H.04, subdivision 3, when implemented.
45.3    Subd. 3. Exception for new steel production facility. The prohibitions in
45.4subdivision 1 do not apply to increases in statewide power sector carbon dioxide
45.5emissions from that portion of a new large energy facility or new long-term power
45.6purchase agreement that supplies electricity to a new steel production project located in a
45.7taconite tax relief area that has applied for an air quality permit from the Pollution Control
45.8Agency prior to January 1, 2007, provided that the commission determines that the new
45.9steel production project is designed to meet the highest energy efficiency standards in its
45.10industry.
45.11    Subd. 4. Enforcement. Whenever the commission or department determines that
45.12any person is violating or about to violate this section, it shall refer the matter to the
45.13attorney general who shall take appropriate legal action. This section may be enforced by
45.14the attorney general on the same basis as a law listed in section 8.31, subdivision 1.

45.15    Sec. 6. [216H.06] GREENHOUSE GAS EMISSIONS CONSIDERATION IN
45.16RESOURCE PLANNING.
45.17    By January 1, 2008, the Public Utilities Commission shall establish an estimate of
45.18the likely range of costs of future carbon dioxide regulation on electricity generation.
45.19The estimate, which may be made in a commission order, must be used in all electricity
45.20generation resource acquisition proceedings. The estimates, and annual updates, must be
45.21made following informal proceedings that allow interested parties to submit comments.

45.22    Sec. 7. [216H.07] ENFORCEABILITY.
45.23    In addition to any other remedies provided by law, the failure to carry out any
45.24requirement established by or pursuant to this chapter shall be treated as a violation of an
45.25environmental standard and is enforceable under chapter 116B.


45.28    Section 1. Laws 2007, chapter 3, section 1, subdivision 5, is amended to read:
45.29    Subd. 5. Technology based on fuel combustion. (a) Electricity produced by fuel
45.30combustion through fuel blending or co-firing under paragraph (b) may only count toward
45.31a utility's objectives or standards if the generation facility:
45.32    (1) was constructed in compliance with new source performance standards
45.33promulgated under the federal Clean Air Act for a generation facility of that type; or
45.34    (2) employs the maximum achievable or best available control technology available
45.35for a generation facility of that type.
46.1    (b) An eligible energy technology may blend or co-fire a fuel listed in subdivision
46.21, paragraph (a), clause (1) (5), with other fuels in the generation facility, but only the
46.3percentage of electricity that is attributable to a fuel listed in that clause can be counted
46.4toward an electric utility's renewable energy objectives.

46.5    Sec. 2. Laws 2007, chapter 3, section 1, subdivision 7, is amended to read:
46.6    Subd. 7. Compliance. The commission must regularly investigate whether an
46.7electric utility is in compliance with its good-faith objective under subdivision 2 and
46.8standard obligation under subdivision 2a. If the commission finds noncompliance, it may
46.9order the electric utility to construct facilities, purchase energy generated by eligible
46.10energy technology, purchase renewable energy credits, or engage in other activities
46.11to achieve compliance. If an electric utility fails to comply with an order under this
46.12subdivision, the commission may impose a financial penalty on the electric utility in an
46.13amount not to exceed the estimated cost of the electric utility to achieve compliance. The
46.14penalty may not exceed the lesser of the cost of constructing facilities or purchasing
46.15credits. The commission must deposit financial penalties imposed under this subdivision
46.16in the energy and conservation account established in the special revenue fund under
46.17section 216B.241, subdivision 2a. This subdivision is in addition to and does not limit any
46.18other authority of the commission to enforce this section."
46.19Amend the title accordingly