1.1    .................... moves to amend H. F. No. 1221 as follows:
1.2Delete everything after the enacting clause and insert:


1.5    Section 1. Minnesota Statutes 2006, section 216B.16, subdivision 1, is amended to read:
1.6    Subdivision 1. Notice. Unless the commission otherwise orders, no public utility
1.7shall change a rate which has been duly established under this chapter, except upon 60
1.8days' notice to the commission. The notice shall include statements of facts, expert
1.9opinions, substantiating documents, and exhibits, supporting the change requested, and
1.10state the change proposed to be made in the rates then in force and the time when the
1.11modified rates will go into effect. If the filing utility does not have an approved energy
1.12conservation improvement plan on file with the department, it shall also include in its
1.13notice an energy conservation plan pursuant to section 216B.241. A filing subject to rate
1.14regulation under section 216B.026 shall reference in its notice the energy conservation
1.15improvement plans of the generation and transmission cooperative providing energy
1.16conservation improvement programs to members of the filing utility pursuant to section
1.17216B.241. The filing utility shall give written notice, as approved by the commission, of
1.18the proposed change to the governing body of each municipality and county in the area
1.19affected. All proposed changes shall be shown by filing new schedules or shall be plainly
1.20indicated upon schedules on file and in force at the time.

1.21    Sec. 2. Minnesota Statutes 2006, section 216B.16, subdivision 6b, is amended to read:
1.22    Subd. 6b. Energy conservation improvement. (a) Except as otherwise provided
1.23in this subdivision, all investments and expenses of a public utility as defined in
1.24section 216B.241, subdivision 1, paragraph (e) (i), incurred in connection with energy
1.25conservation improvements shall be recognized and included by the commission in the
1.26determination of just and reasonable rates as if the investments and expenses were directly
1.27made or incurred by the utility in furnishing utility service.
2.1    (b) After December 31, 1999, Investments and expenses for energy conservation
2.2improvements shall not be included by the commission in the determination of (i) just and
2.3reasonable electric and gas rates for retail electric and gas service provided to large electric
2.4customer facilities that have been exempted by the commissioner of the department
2.5pursuant to section 216B.241, subdivision 1a, paragraph (b); or (ii) just and reasonable
2.6gas rates for large energy facilities. However, no public utility shall be prevented from
2.7recovering its investment in energy conservation improvements from all customers that
2.8were made on or before December 31, 1999, in compliance with the requirements of
2.9section 216B.241.
2.10    (c) The commission may permit a public utility to file rate schedules providing for
2.11annual recovery of the costs of energy conservation improvements. These rate schedules
2.12may be applicable to less than all the customers in a class of retail customers if necessary to
2.13reflect the differing minimum spending requirements of section 216B.241, subdivision 1a.
2.14After December 31, 1999, The commission shall allow a public utility, without requiring
2.15a general rate filing under this section, to reduce the electric and gas rates applicable to
2.16large electric customer facilities that have been exempted by the commissioner of the
2.17department pursuant to section 216B.241, subdivision 1a, paragraph (b), and to reduce the
2.18gas rate applicable to a large energy facility by an amount that reflects the elimination
2.19of energy conservation improvement investments or expenditures for those facilities
2.20required on or before December 31, 1999. In the event that the commission has set
2.21electric or gas rates based on the use of an accounting methodology that results in the cost
2.22of conservation improvements being recovered from utility customers over a period of
2.23years, the rate reduction may occur in a series of steps to coincide with the recovery of
2.24balances due to the utility for conservation improvements made by the utility on or before
2.25December 31, 1999 2007.

2.26    Sec. 3. [216B.2401] ENERGY CONSERVATION POLICY GOAL.
2.27    It is the energy policy of the state of Minnesota to achieve annual energy savings
2.28equal to 1.5 percent of retail energy sales of electricity and natural gas directly through
2.29energy conservation improvement programs and rate design, and indirectly through
2.30energy codes and appliance standards, programs designed to transform the market or
2.31change consumer behavior, and other efforts to promote energy efficiency and energy
2.32conservation.

2.33    Sec. 4. Minnesota Statutes 2006, section 216B.241, is amended to read:
2.34216B.241 ENERGY CONSERVATION IMPROVEMENT.
2.35    Subdivision 1. Definitions. For purposes of this section and section 216B.16,
2.36subdivision 6b , the terms defined in this subdivision have the meanings given them.
3.1    (a) "Commission" means the Public Utilities Commission.
3.2    (b) "Commissioner" means the commissioner of commerce.
3.3    (c) "Customer facility" means all buildings, structures, equipment, and installations
3.4at a single site.
3.5    (d) "Department" means the Department of Commerce.
3.6    (e) "Energy conservation" means demand-side management of energy supplies
3.7resulting in a net reduction in energy use. Load management that reduces overall energy
3.8use is energy conservation.
3.9    (f) "Energy efficiency" means measures or programs, including energy conservation
3.10measures or programs, that target consumer behavior, equipment, processes, or devices
3.11designed to produce either an absolute decrease in consumption of electric energy or
3.12natural gas or a decrease in consumption of electric energy or natural gas on a per unit
3.13of production basis without a reduction in the quality or level of service provided to
3.14the energy consumer.
3.15    (g) "Energy conservation improvement" means a project that results in energy
3.16conservation.
3.17    (g) (h) "Gross annual retail energy sales" means annual electric sales to all retail
3.18customers in a utility's or association's Minnesota service territory or natural gas
3.19throughput to all retail customers, including natural gas transportation customers, on a
3.20utility's distribution system in Minnesota. For purposes of this section, gross annual retail
3.21energy sales exclude gas sales to a large energy facility, as defined in section 216B.241,
3.22subdivision 1a, paragraph (b).
3.23    (i) "Investments and expenses of a public utility" includes the investments and
3.24expenses incurred by a public utility in connection with an energy conservation
3.25improvement, including but not limited to:
3.26    (1) the differential in interest cost between the market rate and the rate charged on a
3.27no-interest or below-market interest loan made by a public utility to a customer for the
3.28purchase or installation of an energy conservation improvement;
3.29    (2) the difference between the utility's cost of purchase or installation of energy
3.30conservation improvements and any price charged by a public utility to a customer for
3.31such improvements.
3.32    (h) (j) "Large electric customer facility" means a customer facility that imposes a
3.33peak electrical demand on an electric utility's system of not less than 20,000 kilowatts,
3.34measured in the same way as the utility that serves the customer facility measures
3.35electrical demand for billing purposes, and for which electric services are provided at
3.36retail on a single bill by a utility operating in the state.
4.1    (i) (k) "Large energy facility" has the meaning given it in section 216B.2421,
4.2subdivision 2, clause (1).
4.3    (l) "Load management" means an activity, service, or technology to change the
4.4timing or the efficiency of a customer's use of energy that allows a utility or a customer
4.5to respond to wholesale market fluctuations or to reduce the overall peak demand for
4.6energy or capacity.
4.7    (m) "Low income programs" means energy conservation improvement programs
4.8that directly serve the needs of low income persons, including low income renters.
4.9    Subd. 1a. Investment, expenditure, and contribution; public utility. (a) For
4.10purposes of this subdivision and subdivision 2, "public utility" has the meaning given it
4.11in section 216B.02, subdivision 4. Each public utility shall spend and invest for energy
4.12conservation improvements under this subdivision and subdivision 2 the following
4.13amounts:
4.14    (1) for a utility that furnishes gas service, 0.5 percent of its gross operating revenues
4.15from service provided in the state;
4.16    (2) for a utility that furnishes electric service, 1.5 percent of its gross operating
4.17revenues from service provided in the state; and
4.18    (3) for a utility that furnishes electric service and that operates a nuclear-powered
4.19electric generating plant within the state, two percent of its gross operating revenues
4.20from service provided in the state.
4.21    For purposes of this paragraph (a), "gross operating revenues" do not include
4.22revenues from large electric customer facilities exempted by the commissioner under
4.23paragraph (b).
4.24    (b) The owner of a large electric customer facility may petition the commissioner
4.25to exempt both electric and gas utilities serving the large energy customer facility from
4.26the investment and expenditure requirements of paragraph (a) with respect to retail
4.27revenues attributable to the facility. At a minimum, the petition must be supported by
4.28evidence relating to competitive or economic pressures on the customer and a showing
4.29by the customer of reasonable efforts to identify, evaluate, and implement cost-effective
4.30conservation improvements at the facility. If a petition is filed on or before October 1 of
4.31any year, the order of the commissioner to exempt revenues attributable to the facility can
4.32be effective no earlier than January 1 of the following year. The commissioner shall
4.33not grant an exemption if the commissioner determines that granting the exemption is
4.34contrary to the public interest. The commissioner may, after investigation, rescind any
4.35exemption granted under this paragraph upon a determination that cost-effective the
4.36customer is not continuing to make reasonable efforts to identify, evaluate, and implement
5.1energy conservation improvements are available at the large electric customer facility.
5.2For the purposes of this paragraph, "cost-effective" means that the projected total cost of
5.3the energy conservation improvement at the large electric customer facility is less than
5.4the projected present value of the energy and demand savings resulting from the energy
5.5conservation improvement. For the purposes of investigations by the commissioner under
5.6this paragraph, the owner of any large electric customer facility shall, upon request,
5.7provide the commissioner with updated information comparable to that originally supplied
5.8in or with the owner's original petition under this paragraph.
5.9    (c) The commissioner may require investments or spending greater than the amounts
5.10required under this subdivision for a public utility whose most recent advance forecast
5.11required under section 216B.2422 or 216C.17 projects a peak demand deficit of 100
5.12megawatts or greater within five years under midrange forecast assumptions.
5.13    (d) A public utility or owner of a large electric customer facility may appeal
5.14a decision of the commissioner under paragraph (b) or (c) to the commission under
5.15subdivision 2. In reviewing a decision of the commissioner under paragraph (b) or (c),
5.16the commission shall rescind the decision if it finds that the required investments or
5.17spending will:
5.18    (1) not result in cost-effective energy conservation improvements; or
5.19    (2) otherwise not be in the public interest.
5.20    (e) Each utility shall determine what portion of the amount it sets aside for
5.21conservation improvement will be used for conservation improvements under subdivision
5.222 and what portion it will contribute to the energy and conservation account established in
5.23subdivision 2a. A public utility may propose to the commissioner to designate that all
5.24or a portion of funds contributed to the account established in subdivision 2a be used
5.25for research and development projects that can best be implemented on a statewide
5.26basis. Contributions must be remitted to the commissioner by February 1 of each year.
5.27Nothing in this subdivision prohibits a public utility from spending or investing for energy
5.28conservation improvement more than required in this subdivision.
5.29    Subd. 1b. Conservation improvement by cooperative association or
5.30municipality. (a) This subdivision applies to:
5.31    (1) a cooperative electric association that provides retail service to its members;
5.32    (2) a municipality that provides electric service to retail customers; and
5.33    (3) a municipality with gross operating revenues in excess of $5,000,000 from
5.34sales of more than 1,000,000,000 cubic feet in annual throughput sales to natural gas
5.35to retail customers.
6.1    (b) Each cooperative electric association and municipality subject to this subdivision
6.2shall spend and invest for energy conservation improvements under this subdivision
6.3the following amounts:
6.4    (1) for a municipality, 0.5 percent of its gross operating revenues from the sale of
6.5gas and 1.5 percent of its gross operating revenues from the sale of electricity, excluding
6.6gross operating revenues from electric and gas service provided in the state to large
6.7electric customer facilities; and
6.8    (2) for a cooperative electric association, 1.5 percent of its gross operating revenues
6.9from service provided in the state, excluding gross operating revenues from service
6.10provided in the state to large electric customer facilities indirectly through a distribution
6.11cooperative electric association.
6.12    (c) Each municipality and cooperative electric association subject to this subdivision
6.13shall identify and implement energy conservation improvement spending and investments
6.14that are appropriate for the municipality or association, except that a municipality
6.15or association may not spend or invest for energy conservation improvements that
6.16directly benefit a large energy facility or a large electric customer facility for which the
6.17commissioner has issued an exemption under subdivision 1a, paragraph (b).
6.18    (d) Each municipality and cooperative electric association subject to this subdivision
6.19may spend and invest annually up to ten percent of the total amount required to be spent
6.20and invested on energy conservation improvements under this subdivision on research
6.21and development projects that meet the definition of energy conservation improvement
6.22in subdivision 1 and that are funded directly by the municipality or cooperative electric
6.23association.
6.24    (e) Load-management activities that do not reduce energy use but that increase the
6.25efficiency of the electric system may be used to meet 50 percent of the conservation
6.26investment and spending requirements of this subdivision.
6.27    (f) A generation and transmission cooperative electric association that provides
6.28energy services to cooperative electric associations that provide electric service at retail to
6.29consumers may invest in energy conservation improvements on behalf of the associations
6.30it serves and may fulfill the conservation, spending, reporting, and energy savings goals on
6.31an aggregate basis. A municipal power agency or other not-for-profit entity that provides
6.32energy service to municipal utilities that provide electric service at retail may invest in
6.33energy conservation improvements on behalf of the municipal utilities it serves and may
6.34fulfill the conservation, spending, reporting, and energy savings goals on an aggregate
6.35basis, under an agreement between the municipal power agency or not-for-profit entity
6.36and each municipal utility for funding the investments.
7.1    (g) At least every four years, on a schedule determined by the commissioner, each
7.2municipality or cooperative shall file an overview of its conservation improvement plan
7.3with the commissioner. With this overview, Each municipality or cooperative shall file
7.4energy efficiency and conservation improvement plans by June 1 on a schedule determined
7.5by order of the commissioner, but at least every three years. Plans received by June 1 must
7.6be approved or approved as modified by the commissioner by December 1 of the same
7.7year. The municipality or cooperative shall also provide an evaluation to the commissioner
7.8detailing its energy conservation improvement spending and investments for the previous
7.9period. The evaluation must briefly describe each conservation program and must specify
7.10the energy savings or increased efficiency in the use of energy within the service territory
7.11of the utility or association that is the result of the spending and investments. The
7.12evaluation must analyze the cost-effectiveness of the utility's or association's conservation
7.13programs, using a list of baseline energy and capacity savings assumptions developed
7.14in consultation with the department. The commissioner shall review each evaluation
7.15and make recommendations, where appropriate, to the municipality or association to
7.16increase the effectiveness of conservation improvement activities. Up to three percent of
7.17a utility's conservation spending obligation under this section may be used for program
7.18pre-evaluation, testing, and monitoring and program evaluation. The overview and
7.19evaluation filed by a municipality with less than 60,000,000 kilowatt-hours in annual
7.20retail sales of electric service may consist of a letter from the governing board of the
7.21municipal utility to the department providing the amount of annual conservation spending
7.22required of that municipality and certifying that the required amount has been spent on
7.23conservation programs pursuant to this subdivision.
7.24    (h) The commissioner shall also review each evaluation for whether a portion of the
7.25money spent on residential conservation improvement programs is devoted to programs
7.26that directly address the needs of renters and low-income persons unless an insufficient
7.27number of appropriate programs are available. For the purposes of this subdivision and
7.28subdivision 2, "low-income" means an income at or below 50 percent of the state median
7.29income.
7.30    (i) As part of its spending for conservation improvement, a municipality or
7.31association may contribute to the energy and conservation account. A municipality or
7.32association may propose to the commissioner to designate that all or a portion of funds
7.33contributed to the account be used for research and development projects that can best
7.34be implemented on a statewide basis. Any amount contributed must be remitted to the
7.35commissioner by February 1 of each year.
8.1    (j) (h) A municipality may spend up to 50 percent of its required spending under
8.2this section to refurbish an existing district heating or cooling system. This paragraph
8.3expires July 1, 2007.
8.4    (i) The commissioner shall consider and may require a utility, association, or
8.5other entity providing energy efficiency and conservation services under this section to
8.6undertake a program suggested by an outside source, including a political subdivision,
8.7nonprofit corporation, or community organization.
8.8    Subd. 1c. Energy-saving goals. (a) The commissioner shall establish energy-saving
8.9goals for energy conservation improvement expenditures and shall evaluate an energy
8.10conservation improvement program on how well it meets the goals set.
8.11    (b) Each individual utility and association shall have an annual energy-savings
8.12goal equivalent to 1.5 percent of gross annual retail energy sales unless modified by the
8.13commissioner under paragraph (d). The savings must be calculated based on the most
8.14recent three-year weather normalized average.
8.15    (c) The commissioner must adopt a filing schedule that is designed to have all
8.16utilities and associations operating under an energy savings plan by calendar year 2010.
8.17    (d) In its energy conservation improvement plan, a utility or association may
8.18request the commissioner to adjust its annual energy savings percentage goal based on
8.19its historical conservation investment experience, customer class makeup, load growth, a
8.20conservation potential study, or other factors the commissioner determines warrants an
8.21adjustment. The commissioner may not approve a plan that provides for an annual energy
8.22savings goal of less than one percent of gross annual retail energy sales.
8.23    (e) An energy savings goal is not satisfied by attaining the revenue expenditure
8.24requirements of subdivisions 1a and 1b, but can only be satisfied by meeting the energy
8.25savings goal established in this subdivision.
8.26    (f) An association or utility is not required to make energy conservation investments
8.27that are not cost-effective even if the investment is necessary to attain the energy savings
8.28goals. For the purpose of this paragraph, "cost-effective" means that the total cost of the
8.29energy savings to the utility is less than or equal to the cost to the utility to produce or
8.30purchase an equivalent amount of new supply of energy.
8.31    (g) On an annual basis, the commissioner shall produce and make publicly available
8.32a report on the annual energy savings and estimated carbon dioxide reductions achieved
8.33by the energy efficiency and conservation improvement programs for the two most recent
8.34years for which data is available. The commissioner shall report on program performance
8.35both in the aggregate and for each entity filing an energy efficiency and conservation plan
8.36for approval or review by the commissioner under subdivisions 1a and 1b.
9.1    (h) By January 15, 2010, the commissioner shall report to the legislature whether the
9.2spending requirements under section 216B.241, subdivisions 1a and 1b, are necessary to
9.3achieve the energy savings goals established in this subdivision.
9.4    Subd. 1d. Cooperative conservation investment increase phase-in Technical
9.5assistance. The increase in required conservation improvement expenditures by a
9.6cooperative electric association that results from the amendments in Laws 2001, chapter
9.7212, article 8, section 6, to subdivision 1b, paragraph (a), clause (1), must be phased
9.8in as follows:
9.9    (1) at least 25 percent shall be effective in year 2002;
9.10    (2) at least 50 percent shall be effective in year 2003;
9.11    (3) at least 75 percent shall be effective in year 2004; and
9.12    (4) all of the increase shall be effective in year 2005 and thereafter.
9.13    The commissioner shall, by order, establish, maintain and update energy savings
9.14assumptions for energy conservation improvements and an inventory of the most
9.15effective energy conservation programs, techniques, and technologies. The commissioner
9.16shall encourage all Minnesota utilities to implement these programs, techniques, and
9.17technologies, where appropriate, in their service territories. The commissioner shall
9.18describe these programs in sufficient detail to provide a utility reasonable guidance
9.19concerning implementation. The commissioner shall prioritize the opportunities in order
9.20of potential energy savings and in order of cost-effectiveness and to evaluate energy
9.21conservation improvement programs. The commissioner may contract with a third party to
9.22carry out any of the commissioner's duties under this subdivision, and to obtain technical
9.23assistance to evaluate the effectiveness of any conservation improvement program. The
9.24commissioner may assess up to $550,000 annually for the purposes of this subdivision.
9.25The assessments must be deposited into the energy and conservation account.
9.26    Subd. 1e. Applied research and development grants. The commission shall, by
9.27order, establish a proceeding that requires utilities subject to this section to submit to the
9.28commission a description of energy conservation applied research projects they propose
9.29to conduct during the following calendar year and the projected cost of each project.
9.30Based on these plans and comments received during the proceeding, the department shall
9.31prepare, by January 1 of each year, beginning in 2008, a statewide energy conservation
9.32applied research plan that aggregates the individual utility applied research plans and
9.33identifies any gaps in energy conservation applied research that would have statewide
9.34benefits. The department may conduct or contract with an entity to conduct energy
9.35conservation applied research projects it deems to have statewide significance that would
9.36further the purposes of this section and contribute to meeting the statewide energy-saving
10.1goals established in subdivision 1c. For the purpose of conducting energy conservation
10.2applied research studies under this subdivision, the department may assess utilities under
10.3its authority in subdivision 8 up to the difference between the total projected cost of all
10.4utilities' applied research projects for the following calendar year and the amount they are
10.5collectively required to spend for conservation improvement projects under subdivision
10.61a, paragraph (a).
10.7    Subd. 1f. Facilities energy efficiency. (a) The Department of Administration
10.8and the Department of Commerce shall maintain and, as needed, revise the sustainable
10.9building design guidelines developed under section 16B.325.
10.10    (b) The Department of Administration and the Department of Commerce shall
10.11maintain and update the benchmarking tool developed under Laws 2001, chapter 212,
10.12article 1, section 3, so that all public buildings can use the benchmarking tool to maintain
10.13energy use information for the purposes of establishing energy efficiency benchmarks,
10.14tracking building performance and measuring the results of energy efficiency and
10.15conservation improvements.
10.16    (c) The commissioner shall require that utilities include in their conservation
10.17improvement plans programs that facilitate professional engineering verification to qualify
10.18a building as Energy Star-certified or as Leadership in Energy and Environmental Design
10.19(LEED) certified. The state goal is to achieve certification of 1,000 commercial buildings
10.20as energy star-certified, and 100 commercial buildings as LEED-certified by December
10.2131, 2010.
10.22    (d) The commissioner may assess up to $500,000 annually for the purposes of this
10.23subdivision. The assessments must be deposited into the energy and conservation account.
10.24    Subd. 2. Programs. (a) The commissioner may require public utilities to make
10.25investments and expenditures in energy conservation improvements, explicitly setting
10.26forth the interest rates, prices, and terms under which the improvements must be offered to
10.27the customers. The required programs must cover no more than a four-year three-year
10.28period. Public utilities shall file conservation improvement plans by June 1, on a schedule
10.29determined by order of the commissioner, but at least every four three years. Plans
10.30received by a public utility by June 1 must be approved or approved as modified by the
10.31commissioner by December 1 of that same year. The commissioner shall give special
10.32consideration and encouragement to programs that bring about significant net savings
10.33through the use of energy-efficient lighting. The commissioner shall evaluate the program
10.34on the basis of cost-effectiveness and the reliability of technologies employed. The
10.35commissioner's order must provide to the extent practicable for a free choice, by consumers
10.36participating in the program, of the device, method, material, or project constituting the
11.1energy conservation improvement and for a free choice of the seller, installer, or contractor
11.2of the energy conservation improvement, provided that the device, method, material, or
11.3project seller, installer, or contractor is duly licensed, certified, approved, or qualified,
11.4including under the residential conservation services program, where applicable.
11.5    (b) The commissioner may require a utility to make an energy conservation
11.6improvement investment or expenditure whenever the commissioner finds that the
11.7improvement will result in energy savings at a total cost to the utility less than the cost
11.8to the utility to produce or purchase an equivalent amount of new supply of energy. The
11.9commissioner shall nevertheless ensure that every public utility operate one or more
11.10programs under periodic review by the department.
11.11    (c) Each public utility subject to subdivision 1a may spend and invest annually up to
11.12ten percent of the total amount required to be spent and invested on energy conservation
11.13improvements under this section by the utility on research and development projects
11.14that meet the definition of energy conservation improvement in subdivision 1 and that
11.15are funded directly by the public utility.
11.16    (d) A public utility may not spend for or invest in energy conservation improvements
11.17that directly benefit a large energy facility or a large electric customer facility for which
11.18the commissioner has issued an exemption pursuant to subdivision 1a, paragraph (b). The
11.19commissioner shall consider and may require a utility to undertake a program suggested
11.20by an outside source, including a political subdivision or, a nonprofit corporation, or
11.21community organization.
11.22    (e) The commissioner may, by order, establish a list of programs that may be
11.23offered as energy conservation improvements by a public utility, municipal utility,
11.24cooperative electric association, or other entity providing conservation services pursuant
11.25to this section. The list of programs may include rebates for high-efficiency appliances,
11.26rebates or subsidies for high-efficiency lamps, small business energy audits, and building
11.27recommissioning. The commissioner may, by order, change this list to add or subtract
11.28programs as the commissioner determines is necessary to promote efficient and effective
11.29conservation programs.
11.30    (f) The commissioner shall ensure that a portion of the money spent on residential
11.31conservation improvement programs is devoted to programs that directly address the
11.32needs of renters and low-income persons, in proportion to the amount the utility has
11.33historically spent on such programs based on the most recent three-year average relative to
11.34the utility's total conservation spending under this section, unless an insufficient number of
11.35appropriate programs are available.
12.1    (g) (e) A utility, a political subdivision, or a nonprofit or community organization
12.2that has suggested a program, the attorney general acting on behalf of consumers and
12.3small business interests, or a utility customer that has suggested a program and is not
12.4represented by the attorney general under section 8.33 may petition the commission to
12.5modify or revoke a department decision under this section, and the commission may do
12.6so if it determines that the program is not cost-effective, does not adequately address the
12.7residential conservation improvement needs of low-income persons, has a long-range
12.8negative effect on one or more classes of customers, or is otherwise not in the public
12.9interest. The commission shall reject a petition that, on its face, fails to make a reasonable
12.10argument that a program is not in the public interest.
12.11    (h) (f) The commissioner may order a public utility to include, with the filing of the
12.12utility's proposed conservation improvement plan under paragraph (a), the results of an
12.13independent audit of the utility's conservation improvement programs and expenditures
12.14performed by the department or an auditor with experience in the provision of energy
12.15conservation and energy efficiency services approved by the commissioner and chosen by
12.16the utility. The audit must specify the energy savings or increased efficiency in the use
12.17of energy within the service territory of the utility that is the result of the spending and
12.18investments. The audit must evaluate the cost-effectiveness of the utility's conservation
12.19programs.
12.20    (i) Up to three percent of a utility's conservation spending obligation under this
12.21section may be used for program pre-evaluation, testing, and monitoring and program
12.22audit and evaluation.
12.23    Subd. 2a. Energy and conservation account. The commissioner must deposit
12.24money contributed under subdivisions 1a and 1b assesed or contributed under subdivisions
12.251d, 1e, 1f, and 7 in the energy and conservation account in the general fund. Money in
12.26the account is appropriated to the department for programs designed to meet the energy
12.27conservation needs of low-income persons and to make energy conservation improvements
12.28in areas not adequately served under subdivision 2, including research and development
12.29projects included in the definition of energy conservation improvement in subdivision 1
12.30the purposes of subdivisions 1d, 1e, 1f, and 7. Interest on money in the account accrues to
12.31the account. Using information collected under section 216C.02, subdivision 1, paragraph
12.32(b) , the commissioner must, to the extent possible, allocate enough money to programs
12.33for low-income persons to assure that their needs are being adequately addressed.
12.34The commissioner must request the commissioner of finance to transfer money from
12.35the account to the commissioner of education for an energy conservation program for
12.36low-income persons. In establishing programs, the commissioner must consult political
13.1subdivisions and nonprofit and community organizations, especially organizations
13.2engaged in providing energy and weatherization assistance to low-income persons. At
13.3least one program must address the need for energy conservation improvements in areas
13.4in which a high percentage of residents use fuel oil or propane to fuel their source of
13.5home heating. The commissioner may contract with a political subdivision, a nonprofit
13.6or community organization, a public utility, a municipality, or a cooperative electric
13.7association to implement its programs. The commissioner may provide grants to any
13.8person to conduct research and development projects in accordance with this section.
13.9    Subd. 2b. Recovery of expenses. The commission shall allow a utility to recover
13.10expenses resulting from a conservation improvement program required by the department
13.11and contributions to the energy and conservation account, unless the recovery would
13.12be inconsistent with a financial incentive proposal approved by the commission. The
13.13commission shall allow a cooperative electric association subject to rate regulation under
13.14section 216B.026 to recover expenses resulting from energy conservation improvement
13.15programs, load management programs, and contributions to the energy and conservation
13.16account unless the recovery would be inconsistent with a financial incentive proposal
13.17approved by the commission. In addition, a utility may file annually, or the Public Utilities
13.18Commission may require the utility to file, and the commission may approve, rate
13.19schedules containing provisions for the automatic adjustment of charges for utility service
13.20in direct relation to changes in the expenses of the utility for real and personal property
13.21taxes, fees, and permits, the amounts of which the utility cannot control. A public utility is
13.22eligible to file for adjustment for real and personal property taxes, fees, and permits under
13.23this subdivision only if, in the year previous to the year in which it files for adjustment, it
13.24has spent or invested at least 1.75 percent of its gross revenues from provision of electric
13.25service, excluding gross operating revenues from electric service provided in the state to
13.26large electric customer facilities for which the commissioner has issued an exemption
13.27under subdivision 1a, paragraph (b), and 0.6 percent of its gross revenues from provision
13.28of gas service, excluding gross operating revenues from gas services provided in the state
13.29to large electric customer facilities for which the commissioner has issued an exemption
13.30under subdivision 1a, paragraph (b), for that year for energy conservation improvements
13.31under this section.
13.32    Subd. 3. Ownership of energy conservation improvement. An energy
13.33conservation improvement made to or installed in a building in accordance with this
13.34section, except systems owned by the utility and designed to turn off, limit, or vary the
13.35delivery of energy, are the exclusive property of the owner of the building except to the
13.36extent that the improvement is subjected to a security interest in favor of the utility in case
14.1of a loan to the building owner. The utility has no liability for loss, damage or injury
14.2caused directly or indirectly by an energy conservation improvement except for negligence
14.3by the utility in purchase, installation, or modification of the product.
14.4    Subd. 4. Federal law prohibitions. If investments by public utilities in energy
14.5conservation improvements are in any manner prohibited or restricted by federal law
14.6and there is a provision under which the prohibition or restriction may be waived, then
14.7the commission, the governor, or any other necessary state agency or officer shall take
14.8all necessary and appropriate steps to secure a waiver with respect to those public utility
14.9investments in energy conservation improvements included in this section.
14.10    Subd. 5. Efficient lighting program. (a) Each public utility, cooperative electric
14.11association, and municipal utility that provides electric service to retail customers shall
14.12include as part of its conservation improvement activities a program to strongly encourage
14.13the use of fluorescent and high-intensity discharge lamps. The program must include at
14.14least a public information campaign to encourage use of the lamps and proper management
14.15of spent lamps by all customer classifications.
14.16    (b) A public utility that provides electric service at retail to 200,000 or more
14.17customers shall establish, either directly or through contracts with other persons, including
14.18lamp manufacturers, distributors, wholesalers, and retailers and local government units, a
14.19system to collect for delivery to a reclamation or recycling facility spent fluorescent and
14.20high-intensity discharge lamps from households and from small businesses as defined in
14.21section 645.445 that generate an average of fewer than ten spent lamps per year.
14.22    (c) A collection system must include establishing reasonably convenient locations
14.23for collecting spent lamps from households and financial incentives sufficient to encourage
14.24spent lamp generators to take the lamps to the collection locations. Financial incentives
14.25may include coupons for purchase of new fluorescent or high-intensity discharge lamps,
14.26a cash back system, or any other financial incentive or group of incentives designed to
14.27collect the maximum number of spent lamps from households and small businesses that is
14.28reasonably feasible.
14.29    (d) A public utility that provides electric service at retail to fewer than 200,000
14.30customers, a cooperative electric association, or a municipal utility that provides electric
14.31service at retail to customers may establish a collection system under paragraphs (b) and
14.32(c) as part of conservation improvement activities required under this section.
14.33    (e) The commissioner of the Pollution Control Agency may not, unless clearly
14.34required by federal law, require a public utility, cooperative electric association, or
14.35municipality that establishes a household fluorescent and high-intensity discharge lamp
14.36collection system under this section to manage the lamps as hazardous waste as long as
15.1the lamps are managed to avoid breakage and are delivered to a recycling or reclamation
15.2facility that removes mercury and other toxic materials contained in the lamps prior to
15.3placement of the lamps in solid waste.
15.4    (f) If a public utility, cooperative electric association, or municipal utility contracts
15.5with a local government unit to provide a collection system under this subdivision,
15.6the contract must provide for payment to the local government unit of all the unit's
15.7incremental costs of collecting and managing spent lamps.
15.8    (g) All the costs incurred by a public utility, cooperative electric association, or
15.9municipal utility for promotion and collection of fluorescent and high-intensity discharge
15.10lamps under this subdivision are conservation improvement spending under this section.
15.11    Subd. 6. Renewable energy research. (a) A public utility that owns a nuclear
15.12generation facility in the state shall spend five percent of the total amount that utility
15.13is required to spend under this section to support basic and applied research and
15.14demonstration activities at the University of Minnesota Initiative for Renewable Energy
15.15and the Environment for the development of renewable energy sources and technologies.
15.16The utility shall transfer the required amount to the University of Minnesota on or before
15.17July 1 of each year and that annual amount shall be deducted from the amount of money the
15.18utility is required to spend under this section. The University of Minnesota shall transfer
15.19at least ten percent of these funds to at least one rural campus or experiment station.
15.20    (b) Research funded under this subdivision shall include:
15.21    (1) development of environmentally sound production, distribution, and use of
15.22energy, chemicals, and materials from renewable sources;
15.23    (2) processing and utilization of agricultural and forestry plant products and other
15.24bio-based, renewable sources as a substitute for fossil-fuel-based energy, chemicals, and
15.25materials using a variety of means including biocatalysis, biorefining, and fermentation;
15.26    (3) conversion of state wind resources to hydrogen for energy storage and
15.27transportation to areas of energy demand;
15.28    (4) improvements in scalable hydrogen fuel cell technologies; and
15.29    (5) production of hydrogen from bio-based, renewable sources; and sequestration
15.30of carbon.
15.31    (c) Notwithstanding other law to the contrary, the utility may, but is not required to,
15.32spend more than two percent of its gross operating revenues from service provided in this
15.33state under this section or section 216B.2411.
15.34    (d) This subdivision expires June 30, 2008.
15.35    Subd. 7. Low-income programs. (a) The commissioner shall ensure that each utility
15.36and association provides low income programs. When approving spending and energy
16.1savings goals for low income programs, the commissioner shall consider historic spending
16.2and participation levels, energy savings for low income programs, and the number of low
16.3income persons residing in the utility's service territory. A utility that furnishes gas service
16.4must spend at least 0.2 percent of its gross operating revenue from residential customers in
16.5the state on low income programs. A utility or association that furnishes electric service
16.6must spend at least 0.1 percent of its gross operating revenue from residential customers
16.7in the state on low income programs. For a generation and transmission cooperative
16.8association, this requirement shall apply to each association's members' aggregate gross
16.9operating revenue from sale of electricity to residential customers in the state. Beginning
16.10in 2010, a utility or association that furnishes electric service must spend 0.2 percent of its
16.11gross operating revenue from residential customers in the state on low income programs.
16.12    (b) To meet the requirements of paragraph (a), a utility or association may contribute
16.13funds to the energy and conservation account. An energy conservation improvement plan
16.14must state the amount, if any, of low income energy conservation improvement funds the
16.15utility or association will contribute to the energy and conservation account. Contributions
16.16must be remitted to the commissioner by February 1 of each year.
16.17    (c) The commissioner shall establish low income programs to utilize funds
16.18contributed to the energy and conservation account under paragraph (b). In establishing
16.19low income programs, the commissioner shall consult political subdivisions, utilities, and
16.20nonprofit and community organizations, especially organizations engaged in providing
16.21energy and weatherization assistance to low income persons. Money contributed to the
16.22energy and conservation account under paragraph (b) must provide programs for low
16.23income persons, including low income renters, in the service territory of the utility or
16.24association providing the funds. The commissioner shall record and report expenditures
16.25and energy savings achieved as a result of low income programs funded through the
16.26energy and conservation account in the report required under subdivision 1c, paragraph
16.27(g). The commissioner may contract with a political subdivision, nonprofit or community
16.28organization, public utility, municipality, or cooperative electric association to implement
16.29low income programs funded through the energy and conservation account.
16.30    (d) A utility or association may petition the commissioner to modify its required
16.31spending under paragraph (a) if the utility or association and the commissioner have been
16.32unable to expend the amount required under paragraph (a) for three consecutive years.
16.33    Subd. 8. Assessment. The commission or department may assess utilities subject to
16.34this section in proportion to their respective gross operating revenues from retail sales
16.35of gas or electric service within the state during the last calendar year to carry out the
16.36purposes of subdivisions 1d, 1e, and 1f.

17.1    Sec. 5. [216B.2412] DECOUPLING OF ENERGY SALES FROM REVENUES.
17.2    Subdivision 1. Definition and purpose. For the purpose of this section,
17.3"decoupling" means a regulatory tool designed to separate a utility's revenue from changes
17.4in energy sales. The purpose of decoupling is to reduce a utility's disincentive to promote
17.5energy efficiency.
17.6    Subd. 2. Decoupling criteria. The commission shall, by order, establish criteria
17.7and standards for decoupling. The commission shall design the criteria and standards to
17.8mitigate the impact on public utilities of the energy savings goals under 216B.241 without
17.9adversely affecting utility ratepayers. In designing the criteria, the commission shall
17.10consider energy efficiency, weather, and cost of capital, among other factors.
17.11    Subd. 3. Pilot programs. The commission shall allow one or more rate-regulated
17.12utilities to participate in a pilot program to assess the merits of a rate-decoupling strategy
17.13to promote energy efficiency and conservation. Each pilot program must utilize the
17.14criteria and standards established in subdivision 2 and be designed to determine whether
17.15a rate-decoupling strategy achieves energy savings. On or before a date established by
17.16the commission, the commission shall require all electric and all gas utilities to file a
17.17decoupling pilot plan. Each utility must indicate whether it intends to implement its
17.18plan. A utility that elects not to implement a pilot plan is required to track its plan on a
17.19shadow basis by making the same tariff filings required under full implementation, but
17.20the filings shall be for information purposes only. A pilot program may not exceed three
17.21years in length. Any extension beyond three years can only be approved in a general rate
17.22case, unless that decoupling program was previously approved as part of a general rate
17.23case. The commission shall report on the programs annually to the chairs of the house of
17.24representatives and senate committees with primary jurisdiction over energy policy.

17.25    Sec. 6. EFFECTIVE DATE.
17.26    This article is effective July 1, 2007.


17.29    Section 1. Minnesota Statutes 2006, section 123B.65, subdivision 2, is amended to read:
17.30    Subd. 2. Energy efficiency contract. (a) Notwithstanding any law to the contrary,
17.31a school district may enter into a guaranteed energy savings contract with a qualified
17.32provider to significantly reduce energy or operating costs.
17.33    (b) Before entering into a contract under this subdivision, the board shall comply
17.34with clauses (1) to (5).
18.1    (1) The board must seek proposals from multiple qualified providers by publishing
18.2notice of the proposed guaranteed energy savings contract in the board's official newspaper
18.3and in other publications if the board determines that additional publication is necessary to
18.4notify multiple qualified providers.
18.5    (2) The school board must select the qualified provider that best meets the needs of
18.6the board. The board must provide public notice of the meeting at which it will select the
18.7qualified provider.
18.8    (3) The contract between the board and the qualified provider must describe the
18.9methods that will be used to calculate the costs of the contract and the operational and
18.10energy savings attributable to the contract.
18.11    (4) The qualified provider shall issue a report to the board giving a description of all
18.12costs of installations, modifications, or remodeling, including costs of design, engineering,
18.13installation, maintenance, repairs, or debt service, and giving detailed calculations of the
18.14amounts by which energy or operating costs will be reduced and the projected payback
18.15schedule in years.
18.16    (5) The board must provide published notice of the meeting in which it proposes to
18.17award the contract, the names of the parties to the proposed contract, and the contract's
18.18purpose.
18.19    (c) The board must provide a copy of any contract entered into under paragraph
18.20(a) and the report provided under clause (4) to the commissioner within 30 days of the
18.21effective date of the contract.

18.22    Sec. 2. Minnesota Statutes 2006, section 216C.31, is amended to read:
18.23216C.31 ENERGY AUDIT PROGRAMS.
18.24    The commissioner shall develop and administer state programs of energy audits of
18.25residential and commercial buildings including those required by United States Code, title
18.2642, sections 8211 to 8222 and sections 8281 to 8284. The commissioner shall continue
18.27to administer the residential energy audit program as originally established under the
18.28provisions of United States Code, title 42, sections 8211 to 8222; through July 1, 1986
18.29irrespective of any prior expiration date provided in United States Code, title 42, section
18.308216. The commissioner may approve temporary programs if they are likely to result
18.31in the installation of as many conservation measures as would have been installed had
18.32the utility met the requirements of United States Code, title 42, sections 8211 to 8222.
18.33The Consumer Services Division and the attorney general may release information on
18.34consumer comments about the operation of the program to the commissioner the training
18.35and qualifications necessary for the auditing of residential and commercial buildings under
18.36the auspices of a program created under section 216B.2412.

19.1    Sec. 3. Minnesota Statutes 2006, section 471.345, subdivision 13, is amended to read:
19.2    Subd. 13. Energy efficiency projects. The following definitions apply to this
19.3subdivision.
19.4    (a) "Energy conservation measure" means a training program or facility alteration
19.5designed to reduce energy consumption or operating costs and includes:
19.6    (1) insulation of the building structure and systems within the building;
19.7    (2) storm windows and doors, caulking or weatherstripping, multiglazed windows
19.8and doors, heat absorbing or heat reflective glazed and coated window and door
19.9systems, additional glazing, reductions in glass area, and other window and door system
19.10modifications that reduce energy consumption;
19.11    (3) automatic energy control systems;
19.12    (4) heating, ventilating, or air conditioning system modifications or replacements;
19.13    (5) replacement or modifications of lighting fixtures to increase the energy efficiency
19.14of the lighting system without increasing the overall illumination of a facility, unless an
19.15increase in illumination is necessary to conform to the applicable state or local building
19.16code for the lighting system after the proposed modifications are made;
19.17    (6) energy recovery systems;
19.18    (7) cogeneration systems that produce steam or forms of energy such as heat, as well
19.19as electricity, for use primarily within a building or complex of buildings;
19.20    (8) energy conservation measures that provide long-term operating cost reductions.
19.21    (b) "Guaranteed energy savings contract" means a contract for the evaluation
19.22and recommendations of energy conservation measures, and for one or more energy
19.23conservation measures. The contract must provide that all payments, except obligations
19.24on termination of the contract before its expiration, are to be made over time, but not to
19.25exceed 15 years from the date of final installation, and the savings are guaranteed to the
19.26extent necessary to make payments for the systems.
19.27    (c) "Qualified provider" means a person or business experienced in the design,
19.28implementation, and installation of energy conservation measures. A qualified provider
19.29to whom the contract is awarded shall give a sufficient bond to the municipality for its
19.30faithful performance.
19.31    Notwithstanding any law to the contrary, a municipality may enter into a guaranteed
19.32energy savings contract with a qualified provider to significantly reduce energy or
19.33operating costs.
19.34    Before entering into a contract under this subdivision, the municipality shall provide
19.35published notice of the meeting in which it proposes to award the contract, the names of
19.36the parties to the proposed contract, and the contract's purpose.
20.1    Before installation of equipment, modification, or remodeling, the qualified provider
20.2shall first issue a report, summarizing estimates of all costs of installations, modifications,
20.3or remodeling, including costs of design, engineering, installation, maintenance, repairs,
20.4or debt service, and estimates of the amounts by which energy or operating costs will be
20.5reduced.
20.6    A guaranteed energy savings contract that includes a written guarantee that savings
20.7will meet or exceed the cost of energy conservation measures is not subject to competitive
20.8bidding requirements of section 471.345 or other law or city charter. The contract is
20.9not subject to section 123B.52.
20.10    A municipality may enter into a guaranteed energy savings contract with a qualified
20.11provider if, after review of the report, it finds that the amount it would spend on the energy
20.12conservation measures recommended in the report is not likely to exceed the amount
20.13to be saved in energy and operation costs over 15 years from the date of installation if
20.14the recommendations in the report were followed, and the qualified provider provides a
20.15written guarantee that the energy or operating cost savings will meet or exceed the costs
20.16of the system. The guaranteed energy savings contract may provide for payments over
20.17a period of time, not to exceed 15 years.
20.18    A municipality may enter into an installment payment contract for the purchase and
20.19installation of energy conservation measures. The contract must provide for payments
20.20of not less than 1/15 of the price to be paid within two years from the date of the first
20.21operation, and the remaining costs to be paid monthly, not to exceed a 15-year term from
20.22the date of the first operation.
20.23    A municipality entering into a guaranteed energy savings contract shall provide a
20.24copy of the contract and the report from the qualified provider to the commissioner of
20.25commerce within 30 days of the effective date of the contract.
20.26    Guaranteed energy savings contracts may extend beyond the fiscal year in which
20.27they become effective. The municipality shall include in its annual appropriations measure
20.28for each later fiscal year any amounts payable under guaranteed energy savings contracts
20.29during the year. Failure of a municipality to make such an appropriation does not affect
20.30the validity of the guaranteed energy savings contract or the municipality's obligations
20.31under the contracts.

20.32    Sec. 4. Minnesota Statutes 2006, section 504B.161, subdivision 1, is amended to read:
20.33    Subdivision 1. Requirements. In every lease or license of residential premises, the
20.34landlord or licensor covenants:
20.35    (1) that the premises and all common areas are fit for the use intended by the parties;
21.1    (2) to keep the premises in reasonable repair during the term of the lease or license,
21.2except when the disrepair has been caused by the willful, malicious, or irresponsible
21.3conduct of the tenant or licensee or a person under the direction or control of the tenant or
21.4licensee; and
21.5    (3) to make the premises reasonably energy efficient by installing such measures
21.6as weatherstripping, caulking, storm windows, and storm doors, and to maintain the
21.7premises in compliance with the applicable health and safety laws of the state, including
21.8the weatherstripping, caulking, storm window, and storm door energy efficiency standards
21.9for renter-occupied residences prescribed by section 216C.27, subdivisions 1 and 3, and of
21.10the local units of government where the premises are located during the term of the lease
21.11or license, except when violation of the health and safety laws has been caused by the
21.12willful, malicious, or irresponsible conduct of the tenant or licensee or a person under the
21.13direction or control of the tenant or licensee.
21.14    The parties to a lease or license of residential premises may not waive or modify the
21.15covenants imposed by this section.

21.16    Sec. 5. REPEALER.
21.17Minnesota Statutes 2006, sections 216B.165; 216C.27; and 216C.30, subdivision 5,
21.18and Minnesota Rules, parts 7635.0100; 7635.0110; 7635.0120; 7635.0130; 7635.0140;
21.197635.0150; 7635.0160; 7635.0170; 7635.0180; 7635.0200; 7635.0210; 7635.0220;
21.207635.0230; 7635.0240; 7635.0250; 7635.0260; 7635.0300; 7635.0310; 7635.0320;
21.217635.0330; 7635.0340; 7635.0400; 7635.0410; 7635.0420; 7635.0500; 7635.0510;
21.227635.0520; 7635.0530; 7635.0600; 7635.0610; 7635.0620; 7635.0630; 7635.0640;
21.237635.1000; 7635.1010; 7635.1020; 7635.1030; 7655.0100; 7655.0120; 7655.0200;
21.247655.0220; 7655.0230; 7655.0240; 7655.0250; 7655.0260; 7655.0270; 7655.0280;
21.257655.0290; 7655.0300; 7655.0310; 7655.0320; 7655.0330; 7655.0400; 7655.0410; and
21.267655.0420, are repealed, effective July 1, 2007.

21.27    Sec. 6. EFFECTIVE DATE.
21.28    This article is effective July 1, 2007."
21.29Amend the title accordingly