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State of Minnesota




S.F. No. 722 - Omnibus Energy Bill (second engrossment)
Author: Senator James P. Metzen
Prepared by: John C. Fuller, Senate Counsel (651/296-3914)
Date: May 15, 2001


Background

SF. No. 722 is the Senate omnibus energy proposal. An energy taxing and spending proposal authored by Senator Metzen (SF. No. 1303) has been referred to the Tax Committee from the Senate Telecommunications, Energy and Utilities Committee.

Article 1 - Public Buildings Energy Conservation

Article 1 is the gist of a proposal of Senators Len Price and Steve Kelley.

Section 1 amends current law by extending a shared energy conservation savings program to wholly-state leased buildings. The program is amended to have a requirement to exceed existing energy codes by 30 percent. The authority of the Commissioner of Administration to exclude certain buildings from the program is repealed.

Section 2 requires the Departments of Administration and Commerce to develop sustainable building design standards for new state buildings by January 1, 2003. The standards must exceed existing energy codes by 30 percent. The standards are mandatory for new buildings funded from the bond proceeds fund after January 1, 2004.

Section 3 requires the Department of Administration to develop a comprehensive plan by January 15, 2003, to maximize electrical and thermal energy efficiency in existing public buildings through conservation measures having a simple payback of ten to 15 years. The plan is not mandatory but sets benchmarks and ways to achieve those benchmarks.

Article 2 - Joint Ventures

Article 2 is a statewide expansion of two pilot programs authorizing joint ventures between municipal electric utilities and cooperative electric associations. In addition, under this article, investor-owned public utilities and municipal power agencies are authorized to enter into these joint ventures to provide electric and water services.

Section 1 does not allow the joint ventures to enter into telecommunication activities nor does it allow the extension of service territory beyond those of the joint venturers. The joint ventures may create a separate entity to carry out their activities.

Section 2 exempts the two previously created joint ventures from the provisions of section 1.

Article 3 - Miscellaneous

Section 1 requires the Public Utilities Commission to establish by order generic terms for interconnection and parallel operation of distributed generation of ten megawatts or less. The generic tariffs apply only to natural gas or similar clean fuel distributed electric generation. Within 90 days of the issuance of the PUC's generic order, each public utility shall file a distributed generation tariff consistent with the generic order. Each municipal utility and cooperative electric association must adopt a tariff that addresses the same issues as are included in the Commission's generic order.

Section 2 is a condensation of a bill authored by Senator Sams to promote agricultural resources as an electric generation fuel source. The Legislative Electric Energy Task Force is charged to evaluate that issue.

Article 4 - Consumer Protection

Sections 1 and 2 regulate cold weather disconnections by cooperative electric associations, investor-owned utilities, and municipal utilities and standardizes the disconnection rules for all.

Section 3 provides certain utility customer protections for investor-owned utilities, municipal utilities, and certain cooperative electric association customers. Customers must be offered a budget billing plan, except for municipal utilities with less than 3,000 customers. A payment agreement must be offered for the payment of arrears. Billing for undercharges not caused by the customer are also regulated. Disconnections are prohibited where electric service is medically necessary for sustaining life. The PUC is authorized to resolve certain customer disputes.

Section 4 amends current law relating to low-income rate programs by clarifying the purpose of those programs.

Article 5 - Incentive Payments

This article relates to a current state program that pays an incentive of 1.5 cents per kilowatt hour for a limited time through a standing appropriation for certain electricity generated by hydroelectric and wind resources.

Section 1 allows the Rapidan Dam to continue to receive incentives while it is being refurbished for the purpose of paying for the refurbishment. The ownership structure of wind energy facilities that are eligible for an incentive is clarified. Qualified on-farm biogas recovery facilities are made eligible for the incentive. The date when a hydroelectric facility must be operational is extended to December 31, 2002. The maximum megawatts eligible for wind energy conversion facilities incentive payments is increased from 100 to 125. Rights are given to cure noncompliance with incentive payment requirements.

Article 6 - Distribution Reliability

Section 1 requires the PUC, for public utilities, and municipal and cooperative utilities, for themselves, to adopt distribution safety, reliability, and service quality standards. Reliability standards must be based on defined service interruption indices.

Article 7 - Siting and Routing of Power Plants and Transmission Lines

Article 7 contains the provisions of the bill that are referred to as "streamlining the process for siting power plants and transmission lines." The Public Utilities Commission (PUC) issues certificates of need for power plants and high voltage transmission lines meeting certain definitional thresholds. The Environmental Quality Board (EQB) issues permits to site a power plant or route a transmission line. The EQB also conducts an environmental review as part of its siting process. If the EQB sites a power plant or transmission line, in general local units of government have no authority over the site or route. The intent of Article 7 is to retain all the aspects of public participation and environmental review but to place the question of need in the exclusive jurisdiction of the PUC and questions of environmental review, siting, and routing with the EQB.

Section 1 lowers the voltage required to invoke EQB jurisdiction over a transmission line from 200 to 100 volts. This increases state review but lessens local regulation.

Section 2 redefines a "utility" to include those that have not yet provided utility service in the state. The charge is due to the changing nature of the utility business.

Section 3 explicitly provides that the EQB has no jurisdiction over the need for a facility when that need has been decided by the PUC.

Section 4 is a technical provision.

Section 5 is the first of several sections that rearrange language in current statutes in a fashion to make the statutes more readable and sensibly organized.

Section 5 provides that a person may not construct a large electric generating plant (as defined by the Siting Act) without a site permit from the EQB. High voltage transmission lines that are directly associated with and necessary to interconnect a large electric generating plant to the grid and which are certified as part of the generating plant by the PUC must be sited in one process.

Section 6 strikes old language that is reorganized in subsequent sections and provides that no person may construct a high voltage transmission line (as defined by the Siting Act) without a route permit from the EQB.

Section 7 is a reorganization of old language. Section 7 also has new language designed to speed up the process by requiring a determination whether an application is complete to be made within ten days of receipt and allowing certain application deficiencies to be corrected while the process is ongoing.

Section 8 is also a recodification of existing language. It clarifies that a variety of notices can be given simultaneously to affected parties.

Section 9 is a recodification of language requiring environmental review for a site or route permit.

Section 10 is a recodification of existing language requiring an administrative law judge to conduct a public hearing on an application for a route or site permit.

Section 11 includes as a consideration in designating sites and routes the state's need to have sufficient, cost-effective power supply and electric transmission infrastructure.

Section 12 recodifies the time lines the EQB has to make a decision on a permit. The period for which the time line can be extended is shortened from six to three months.

Section 13 recodifies existing language requiring site and route permits to be issued in accordance with state law and rules of the Board.

Section 14 is a new procedure that replaces what was formerly called an exemption procedure. An exemption procedure exempted a project from state law, however, it resulted either in the denial of an exemption or, if an exemption was granted, in local review. The new alternative procedure results in a permit and lessened and streamlined regulation. An applicant has the option to try the alternative procedure or the regular procedure. Projects that may utilize the alternative procedure are generating plants with a capacity of less than 80 megawatts, plants of any size that are fueled by natural gas, transmission lines of between 100 and 200 kilovolts, lines in excess of 200 kilovolts but less than five miles in length in Minnesota, high voltage transmission lines in excess of 200 kilovolts if at least 80 percent of the line in Minnesota will be located along existing transmission line right-of-way, and certain transmission lines of designated voltages or length serving a single customer. An applicant is not required to submit a second site or route alternative. An environmental assessment is required rather than an environmental impact statement. The public hearing is to be conducted by the Board rather than an administrative law judge. A decision is required within six months of receipt of a completed application with a three month extension possible.

Section 15 provides an applicant with an option to seek a site or route permit from local units of government for certain projects and, if the applicant so elects, no EQB site or route permit is required. A local unit of government may cede is jurisdiction back to the EQB. Projects eligible for local approval include generating plants with a capacity of less than 80 megawatts, plants of any size that burn natural gas and are to be peaking plants, transmission lines of between 100 and 200 kilovolts, substations designed to operate at a voltage of 100 kilovolts or more, and certain high voltage transmission lines designed to serve a single customer.

Section 16 recodifies existing law providing for emergency route or site permits for facilities that require immediate construction to provide adequate electric system supply.

Section 17 is technical and relates to the agenda for the EQB's annual meeting.

Section 18 clarifies the duties of advisory task forces with respect to site and route permits and clarifies the expiration date of the task force.

Section 19 clarifies that a generic investigation by a scientific advisory task force cannot extend the statutory deadline for route or site approval.

Sections 20 to 23 are stylistic and technical.

Section 24 clarifies that eminent domain powers are possessed by an applicant for the purpose of implementing a site permit.

Sections 25 to 28 are stylistic and technical.

Section 29 relates to the PUC's certificate of need authority. Definitions of "electric generating plants" and "transmission lines" subject to the PUC's jurisdiction are altered to be more consistent with the jurisdiction of the EQB over routing and siting of those facilities.

Section 30 creates a new alternative procedure to certify the need for certain transmission projects. Transmission-owning utilities, individually or collectively, by November 1, 2001, and every two years thereafter, must submit a list of projects to the PUC, the Department of Commerce, and the EQB. The Department of Commerce and the staff of the EQB shall hold public meetings for input into projects contained in the report from the utilities. Ninety days after receiving the transmission project report from the utility industry, the Department must recommend to the PUC those projects that it recommends for inclusion on a project list. Within 120 days of the Department's recommendation, the PUC shall certify, certify as modified, or deny certification for projects proposed by the Department. A project certified by the PUC does not need a certificate of need.

Section 31 includes the consideration of increasing reliability of the energy supply in Minnesota and the region when determining the need for a facility under the certificate of need law.

Section 32 requires a person to apply for a certificate of need prior to applying for a site or route permit from the EQB.

Section 33 adds several exemptions to the certificate of need law. They include a high voltage transmission line proposed to serve the demand of a single customer in a single location meeting certain conditions, conversion of the fuel source of an existing plant to natural gas, and modification of an existing plant to increase efficiency as long as capacity of the modified plant is not increased by more than ten percent or 100 megawatts, whichever is greater.

Section 34 authorizes the PUC to assess certain costs incurred under the new section providing for a list of transmission projects.

Section 35 requires the Commissioner of Commerce to prepare an energy planning report by December 15, 2001, addressing a myriad of energy issues.

Section 36 repeals statutes that are obsolete, recodified, or inconsistent with the provisions of the article.

Section 37 is the effective date. Provisions relating to certificate of need and route and site permits apply to permits and certificates applied for on or after August 1, 2001.

Article 8 - Renewable Energy Development

Article 8 requires utilities to provide, by 2015, at least ten percent of their energy supply to retail customers from generation facilities using renewable fuel resources. The requirement is excused if it is too expensive to implement or it interferes with electric system reliability.

Article 9 - Conservation Improvement Program

Article 9 amends the current Conservation Investment Program (CIP).

Section 1 defines "energy conservation" as demand-side net reduction in energy use. Only investments in energy conservation may satisfy the spending requirements under the conservation investment program.

Section 2 is technical.

Section 3 requires that the spending requirement for cooperative electric associations be based on their retail revenues as are all other utilities. It raises the CIP spending requirement for municipal utilities from .5 to one percent of gas revenues and from one to 1.5 percent of revenues from electric service. This makes the municipal electric requirement consistent with cooperative requirements and all investor-owned utilities, except Xcel, which is at two percent. A generation and transmission cooperative may make conservation investments on behalf of its distribution utility members as may a municipal power association or other not-for-profit entity serving municipal utilities. The ability to use load management that does not reduce energy use to satisfy conservation spending obligations is phased down in steps to 40 percent in 2005 and thereafter.

Section 4 provides for annual statewide megawatt capacity savings under the Conservation Investment Program. This requirement is allocated among utilities based on their share of state retail electric service revenues. Savings requirements may be excused if there are no cost-effective conservation investments available in a utility service territory.

Section 5 requires the Commissioner of Commerce to provide a list of programs that may be offered statewide to customers of all utilities.

Section 6 requires a study of the current Conservation Investment Program.

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