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Minnesota Legislature

KEY: stricken = removed, old language.underscored = new language to be added

scs1456CE1

scs1456CE1
1.1A bill for an act
1.2relating to energy; establishing the Clean Energy First Act; requiring electric
1.3utilities to meet resource needs using clean energy resources;amending Minnesota
1.4Statutes 2018, sections 216B.03; 216B.16, subdivisions 6, 13, by adding a
1.5subdivision; 216B.1645, subdivisions 1, 2; 216B.1691, subdivision 9; 216B.2422,
1.6subdivisions 1, 2, 4, 5, by adding subdivisions; proposing coding for new law in
1.7Minnesota Statutes, chapters 216B; 216C.
1.8BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.9    Section 1. TITLE.
1.10Sections 2 to 18 shall be referred to as the "Clean Energy First Act".

1.11    Sec. 2. Minnesota Statutes 2018, section 216B.03, is amended to read:
1.12216B.03 REASONABLE RATE.
1.13Every rate made, demanded, or received by any public utility, or by any two or more
1.14public utilities jointly, shall be just and reasonable. Rates shall not be unreasonably
1.15preferential, unreasonably prejudicial, or discriminatory, but shall be sufficient, equitable,
1.16and consistent in application to a class of consumers. To the maximum reasonable extent,
1.17the commission shall set rates to encourage based on cost of service, while considering
1.18noncost factors such as economic growth, job retention, energy conservation, and renewable
1.19energy use and to further the goals of sections 216B.164, 216B.1696, 216B.241, and 216C.05.
1.20To calculate cost of service, an investor-owned utility shall use, and the commission shall
1.21approve and base rates upon, a class cost of service study that utilizes: (i) a single coincident
1.22peak methodology, based upon the single peak contribution by class at the time of the public
1.23utility's system peak, to classify and allocate fixed production and transmission costs; (ii)
2.1a minimum system study to classify and allocate distribution costs; and (iii) an E8760
2.2allocator for energy costs. Any doubt as to reasonableness should be resolved in favor of
2.3the consumer. For rate-making purposes a public utility may treat two or more municipalities
2.4served by it as a single class wherever the populations are comparable in size or the conditions
2.5of service are similar.
2.6EFFECTIVE DATE.This section is effective the day following final enactment.

2.7    Sec. 3. [216B.035] COMPETITIVE RATE FOR TRANSMISSION LEVEL
2.8CUSTOMERS.
2.9Notwithstanding any other provision of this chapter, for customers that either take service
2.10at a voltage equal to or greater than 69,000 volts or impose a peak demand of greater than
2.1120 megawatts on the utility's system, the average delivered cost of electric energy shall be
2.12at least 20 percent below the national average. For purposes of this section, the national
2.13average shall be as reported by the U.S. Energy Information Administration for industrial
2.14customers of full-service providers.
2.15EFFECTIVE DATE.This section is effective the day following final enactment.

2.16    Sec. 4. Minnesota Statutes 2018, section 216B.16, subdivision 6, is amended to read:
2.17    Subd. 6. Factors considered, generally. The commission, in the exercise of its powers
2.18under this chapter to determine just and reasonable rates for public utilities, shall give due
2.19consideration to the public need for adequate, efficient, and reasonable service and to the
2.20need of the public utility for revenue sufficient to enable it to meet the cost of furnishing
2.21the service, including adequate provision for depreciation of its utility property used and
2.22useful in rendering service to the public, and to earn a fair and reasonable return upon the
2.23investment in such property. In determining the rate base upon which the utility is to be
2.24allowed to earn a fair rate of return, the commission shall give due consideration to evidence
2.25of the cost of the property when first devoted to public use, to prudent acquisition cost to
2.26the public utility less appropriate depreciation on each, to construction work in progress, to
2.27offsets in the nature of capital provided by sources other than the investors, and to other
2.28expenses of a capital nature. For purposes of determining rate base, the commission shall
2.29consider the original cost of utility property included in the base and shall make no allowance
2.30for its estimated current replacement value. If the commission orders a generating facility
2.31to terminate its operations before the end of the facility's physical life in order to comply
2.32with a specific state or federal energy statute or policy, or as part of a resource planning
3.1order under section 216B.2422, the commission may must allow the public utility to recover
3.2any positive net book value of the facility as determined by the commission.

3.3    Sec. 5. Minnesota Statutes 2018, section 216B.16, subdivision 13, is amended to read:
3.4    Subd. 13. Economic and community development. The commission may allow a
3.5public utility to recover from ratepayers the expenses incurred for (1) economic and
3.6community development, and (2) efforts to maximize employment of local workers to
3.7construct and maintain generation facilities that supply power to the utility's customers.

3.8    Sec. 6. Minnesota Statutes 2018, section 216B.16, is amended by adding a subdivision to
3.9read:
3.10    Subd. 20. Rate cap for commercial and industrial class. In allocating costs and
3.11designing rates for retail customers under this section, the commission shall ensure that the
3.12rates for a utility's commercial and industrial class is at least five percent below the national
3.13average for that customer class, consistent with the goal established in section 216C.05,
3.14subdivision 4, and inclusive of the costs charged to this customer class under rate schedules
3.15providing for the automatic adjustment of charges to recover expenses or costs outside of
3.16a rate case approved under this chapter.

3.17    Sec. 7. Minnesota Statutes 2018, section 216B.1645, subdivision 1, is amended to read:
3.18    Subdivision 1. Commission authority. Upon the petition of a public utility, the Public
3.19Utilities Commission shall approve or disapprove power purchase contracts, investments,
3.20or expenditures entered into or made by the utility to satisfy the wind and biomass mandates
3.21contained in sections 216B.169, 216B.2423, and 216B.2424, and to satisfy the renewable
3.22energy objectives and standards set forth in section 216B.1691, including reasonable
3.23investments and expenditures made to:
3.24    (1) transmit the electricity generated from sources developed under those sections that
3.25is ultimately used to provide service to the utility's retail customers, including studies
3.26necessary to identify new transmission facilities needed to transmit electricity to Minnesota
3.27retail customers from generating facilities constructed to satisfy the renewable energy
3.28objectives and standards, provided that the costs of the studies have not been recovered
3.29previously under existing tariffs and the utility has filed an application for a certificate of
3.30need or for certification as a priority project under section 216B.2425 for the new
3.31transmission facilities identified in the studies;
4.1    (2) provide storage facilities for renewable energy generation facilities that contribute
4.2to the reliability, efficiency, or cost-effectiveness of the renewable facilities; or
4.3    (3) develop renewable energy sources from the account required in section 116C.779.;
4.4or
4.5    (4) upgrade or modify existing transmission facilities primarily used to transmit electricity
4.6generated by a clean energy resource, as defined in section 216B.2422, subdivision 1,
4.7paragraph (f), regardless of whether the public utility has satisfied the standards set forth
4.8in section 216B.1691.

4.9    Sec. 8. Minnesota Statutes 2018, section 216B.1645, subdivision 2, is amended to read:
4.10    Subd. 2. Cost recovery. The expenses incurred by the utility over the duration of the
4.11approved contract or useful life of the investment and, expenditures made pursuant to section
4.12116C.779 shall be, and efforts to maximize employment of local workers to construct and
4.13maintain generation facilities that supply power to the utility's customers, are recoverable
4.14from the ratepayers of the utility, to the extent they are not offset by utility revenues
4.15attributable to the contracts, investments, or expenditures. Upon petition by a public utility,
4.16the commission shall approve or approve as modified a rate schedule providing for the
4.17automatic adjustment of charges to recover the expenses or costs approved by the commission
4.18under subdivision 1, which, in the case of transmission expenditures, are limited to the
4.19portion of actual transmission costs that are directly allocable to the need to transmit power
4.20from the renewable sources of energy. The commission may not approve recovery of the
4.21costs for that portion of the power generated from sources governed by this section that the
4.22utility sells into the wholesale market.

4.23    Sec. 9. Minnesota Statutes 2018, section 216B.1691, subdivision 9, is amended to read:
4.24    Subd. 9. Local benefits. The commission shall take all reasonable actions within its
4.25statutory authority to ensure this section is implemented to maximize benefits to Minnesota
4.26citizens and local workers as defined in section 216B.2422, subdivision 1, balancing factors
4.27such as local ownership of or participation in energy production, local job impacts as defined
4.28in section 216B.2422, subdivision 1, development and ownership of eligible energy
4.29technology facilities by independent power producers, Minnesota utility ownership of
4.30eligible energy technology facilities, the costs of energy generation to satisfy the renewable
4.31standard, and the reliability of electric service to Minnesotans.

5.1    Sec. 10. Minnesota Statutes 2018, section 216B.2422, subdivision 1, is amended to read:
5.2    Subdivision 1. Definitions. (a) For purposes of this section, the terms defined in this
5.3subdivision have the meanings given them.
5.4    (b) "Utility" means an entity with the capability of generating 100,000 kilowatts or more
5.5of electric power and serving, either directly or indirectly, the needs of 10,000 retail
5.6customers in Minnesota. Utility does not include federal power agencies.
5.7    (c) "Renewable energy" means electricity generated through use of any of the following
5.8resources:
5.9    (1) wind;
5.10    (2) solar;
5.11    (3) geothermal;
5.12    (4) hydro;
5.13    (5) trees or other vegetation;
5.14    (6) landfill gas and mixed municipal solid waste or refuse-derived fuel from mixed
5.15municipal solid waste; or
5.16    (7) predominantly organic components of wastewater effluent, sludge, or related
5.17by-products from publicly owned treatment works, but not including incineration of
5.18wastewater sludge.
5.19    (d) "Resource plan" means a set of resource options that a utility could use to meet the
5.20service needs of its customers over a forecast period, including an explanation of the supply
5.21and demand circumstances under which, and the extent to which, each resource option
5.22would be used to meet those service needs. These resource options include using,
5.23refurbishing, and constructing utility plant and equipment, buying power generated by other
5.24entities, controlling customer loads, and implementing customer energy conservation.
5.25    (e) "Refurbish" means to rebuild or substantially modify an existing electricity generating
5.26resource of 30 megawatts or greater.
5.27    (f) "Clean energy resource" means renewable energy, an energy storage system, and
5.28energy efficiency and load management, as defined in section 216B.241, subdivision 1, or
5.29a carbon-free resource, as defined under paragraph (g) and determined by the commission
5.30under subdivision 4, paragraph (h).
6.1    (g) "Carbon-free resource" means a generation technology that, when operating, does
6.2not contribute to statewide greenhouse gas emissions, as defined in section 216H.01,
6.3subdivision 2. Carbon-free resource includes power generation utilizing carbon capture and
6.4storage technology.
6.5    (h) "Energy storage system" means a commercially available technology that:
6.6    (1) uses mechanical, chemical, or thermal processes to:
6.7    (i) store energy and deliver the stored energy for use at a later time; or
6.8    (ii) store thermal energy for direct use for heating or cooling at a later time in a manner
6.9that reduces the demand for electricity at the later time;
6.10    (2) if being used for electric grid benefits, is operationally visible and capable of being
6.11controlled by the distribution or transmission entity managing it to enable and optimize the
6.12safe and reliable operation of the electric system; and
6.13    (3) achieves any of the following:
6.14    (i) reduces peak electrical demand;
6.15    (ii) defers the need or substitutes for an investment in electric generation, transmission,
6.16or distribution assets;
6.17    (iii) improves the reliable operation of the electrical transmission or distribution systems;
6.18or
6.19    (iv) lowers customer costs by storing energy when the cost of generating or purchasing
6.20energy is low and delivering energy to customers when costs are high.
6.21    (i) "Nonrenewable energy facility" means a generation facility, other than a nuclear
6.22facility, that does not use a renewable energy or other clean energy resource.
6.23    (j) "Local job impacts" means the impacts of an integrated resource plan, a certificate
6.24of need, a power purchase agreement, or commission approval of a new or refurbished
6.25energy facility on the availability of construction employment opportunities to local workers.
6.26    (k) "Local workers" means workers employed to construct and maintain energy
6.27infrastructure that are Minnesota residents, residents of the utility's service territory, or who
6.28permanently reside within 150 miles of a proposed new or refurbished energy facility.

6.29    Sec. 11. Minnesota Statutes 2018, section 216B.2422, subdivision 2, is amended to read:
6.30    Subd. 2. Resource plan filing and approval. (a) A utility shall file a resource plan with
6.31the commission periodically in accordance with rules adopted by the commission. The
7.1commission shall approve, reject, or modify the plan of a public utility, as defined in section
7.2216B.02, subdivision 4 , consistent with the public interest. The commission's analysis must
7.3consider the economy, job growth, and job retention.
7.4(b) In the resource plan proceedings of all other utilities, the commission's order shall
7.5be advisory and the order's findings and conclusions shall constitute prima facie evidence
7.6which may be rebutted by substantial evidence in all other proceedings. With respect to
7.7utilities other than those defined in section 216B.02, subdivision 4, the commission shall
7.8consider the filing requirements and decisions in any comparable proceedings in another
7.9jurisdiction.
7.10(c) As a part of its resource plan filing, a utility shall include the least cost plan for
7.11meeting 50 and 75 percent of all new energy needs from both new and refurbished generating
7.12facilities through a combination of conservation clean energy and renewable energy
7.13carbon-free resources.

7.14    Sec. 12. Minnesota Statutes 2018, section 216B.2422, subdivision 4, is amended to read:
7.15    Subd. 4. Preference for renewable energy facility clean energy resources. (a) The
7.16commission shall not approve a new or refurbished nonrenewable energy facility in
7.17Minnesota in an integrated resource plan or a certificate of need, pursuant to section
7.18216B.243 , nor shall the commission approve a power purchase agreement for a new or
7.19refurbished asset subject to its jurisdiction or allow rate recovery pursuant to section 216B.16
7.20for such a nonrenewable energy facility, unless the utility has demonstrated that a renewable
7.21energy facility, alone or in combination with other clean energy resources, is not in the
7.22public interest.
7.23(b) When making the public interest determination under paragraph (a), the commission
7.24must consider:
7.25(1) whether the record in the resource plan, proposed certificate of need, or proposed
7.26power purchase agreement for the new or refurbished nonrenewable energy facility in
7.27Minnesota demonstrates the utility is unable affordably and reliably to meet the resource
7.28need the facility is proposed for solely through the addition of clean energy resources, after
7.29evaluation by the utility, the department, and other parties to the docket;
7.30(1) (2) whether the resource plan, proposed certificate of need, or proposed power
7.31purchase agreement helps the utility achieve the greenhouse gas reduction goals under
7.32section 216H.02, the renewable energy standard under section 216B.1691, or the solar
8.1energy standard under section 216B.1691, subdivision 2f, as well as the resource plan's
8.2impact on the economy, job growth, and job retention;
8.3(2) (3) impacts on local and regional grid reliability;
8.4(3) (4) utility and ratepayer impacts resulting from the intermittent nature of renewable
8.5energy facilities, including but not limited to the costs of purchasing wholesale electricity
8.6in the market and the costs of providing ancillary services; and
8.7(4) (5) utility and ratepayer impacts resulting from reduced exposure to fuel price
8.8volatility, changes in transmission costs, portfolio diversification, and environmental
8.9compliance costs, as well as utility and ratepayer impacts that might result from additional
8.10investment in nonrenewable energy facilities.; and
8.11(6) impacts of resource options on customers' bills and utility rates; any doubt regarding
8.12the various resource options before the commission must be resolved in favor of supporting
8.13the economy, job growth, and job retention.
8.14(c) If the commission finds the utility has demonstrated a renewable energy facility,
8.15alone or in combination with other clean energy resources, is not in the public interest under
8.16paragraph (a), the commission may approve a utility's proposal for a new or refurbished
8.17nonrenewable energy facility at the size necessary to ensure reliable and affordable service
8.18to the utility's customers.
8.19(d) This subdivision does not apply to an energy facility approved by the legislature
8.20under Laws 2017, chapter 5, or to commission approval of an affiliated interest agreement
8.21for an energy facility in docket number E015/AI-17-568.
8.22(e) When evaluating the contribution of proposed resources to local and regional
8.23reliability, the commission must consider the ability of proposed resources to provide (1)
8.24essential reliability services needed by utility customers or the electric system, including,
8.25to the extent feasible, frequency response, balancing services, and voltage control, and (2)
8.26energy and capacity.
8.27(f) If the commission approves a resource plan that includes the retirement of a
8.28nonrenewable energy facility owned by a public utility, the public utility shall be entitled
8.29to own the generation, transmission, and other facilities necessary to replace the accredited
8.30capacity of the retiring facility, provided:
8.31(1) the resource plan of a public utility with more than 200,000 retail electric customers
8.32in Minnesota results in having at least 85 percent of the public utility's electric supply come
9.1from resources that do not contribute to statewide greenhouse gas emissions, as defined in
9.2section 216H.01, subdivision 2, by the year 2030 and thereafter;
9.3(2) the resource plan for any public utility with between 50,000 and 200,000 retail electric
9.4customers in Minnesota results in having at least 65 percent of the public utility's electric
9.5supply attributable to serving Minnesota customers, come from resources that do not
9.6contribute to statewide greenhouse gas emissions, as defined in section 216H.01, subdivision
9.72, by the year 2035 and thereafter; and
9.8(3) each public utility demonstrates its ownership of replacement resources is in the
9.9public interest, considering customer impacts and benefits. The commission must give
9.10special consideration to a public utility's proposal under this paragraph if the proposal
9.11replaces the capacity of a retiring nonrenewable energy facility entirely with clean energy
9.12resources.
9.13(g) Nothing in this section impacts a decision to continue operating a nuclear facility
9.14that is generating energy in Minnesota as of June 1, 2019. If a decision is made to retire an
9.15existing nuclear unit, the process in paragraphs (a) to (c) and (e) applies to the identification
9.16of replacement resources.
9.17(h) The commission may, by order, add to the list of resources it determines to be clean
9.18energy resources for the purposes of this section upon a determination that the resource is
9.19carbon free and cost competitive when compared with other carbon-free alternatives.

9.20    Sec. 13. Minnesota Statutes 2018, section 216B.2422, is amended by adding a subdivision
9.21to read:
9.22    Subd. 4a. Preference for local job creation. As a part of its resource plan filing, a utility
9.23must report, to the extent known, on associated local job impacts and the steps the utility
9.24and its energy suppliers and contractors are taking to maximize the availability of construction
9.25employment opportunities for local workers. The commission must consider local job
9.26impacts and give preference to proposals that maximize the creation of construction
9.27employment opportunities for local workers, consistent with the public interest, when
9.28evaluating any utility proposal that involves the selection or construction of facilities used
9.29to generate or deliver energy to serve the utility's customers, including but not limited to an
9.30integrated resource plan, a certificate of need, a power purchase agreement, or commission
9.31approval of a new or refurbished electric generation facility.

10.1    Sec. 14. Minnesota Statutes 2018, section 216B.2422, subdivision 5, is amended to read:
10.2    Subd. 5. Bidding; exemption from certificate of need proceeding. (a) A utility may
10.3select resources to meet its projected energy demand through a bidding process approved
10.4or established by the commission. A utility shall use the environmental cost estimates
10.5determined under subdivision 3 and consider local job impacts in evaluating bids submitted
10.6in a process established under this subdivision.
10.7(b) Notwithstanding any other provision of this section, if an electric power generating
10.8plant, as described in section 216B.2421, subdivision 2, clause (1), is selected in a bidding
10.9process approved or established by the commission, a certificate of need proceeding under
10.10section 216B.243 is not required.
10.11(c) A certificate of need proceeding is also not required for an electric power generating
10.12plant that has been selected in a bidding process approved or established by the commission,
10.13or such other selection process approved by the commission, to satisfy, in whole or in part,
10.14the wind power mandate of section 216B.2423 or the biomass mandate of section 216B.2424.

10.15    Sec. 15. Minnesota Statutes 2018, section 216B.2422, is amended by adding a subdivision
10.16to read:
10.17    Subd. 7. Resource planning conference. The commissioner of commerce may, as
10.18circumstances warrant, convene utilities subject to this section and stakeholders interested
10.19in resource planning to (1) facilitate the sharing of best practices and planning innovations
10.20from one utility resource plan to the next, (2) help resolve issues that impact all utilities
10.21during the resource plan development process, (3) and promote coordination across resource
10.22plans. The commissioner must seek input from likely attendees regarding topics the resource
10.23planning conference should cover. In addition, the agenda for the conference should review
10.24key decisions by the Federal Energy Regulatory Commission and the North American
10.25Electric Reliability Corporation that could impact resource planning, as well as recent and
10.26ongoing transmission studies and market innovations from the Midcontinent Independent
10.27System Operator.

10.28    Sec. 16. Minnesota Statutes 2018, section 216B.2422, is amended by adding a subdivision
10.29to read:
10.30    Subd. 8. Ratepayer impact. The commission may not approve a resource plan under
10.31this section that it determines will cause costs to increase more than a reasonable forecast
10.32of the rate of inflation over the term of the resource plan.

11.1    Sec. 17. [216C.45] POWER PLANT HOST COMMUNITY TRANSITION
11.2PLANNING.
11.3The commissioner of commerce must coordinate with the commissioner of labor and
11.4industry and the commissioner of employment and economic development to develop plans,
11.5programs, and other recommendations to mitigate the impacts on host communities in
11.6Minnesota and workers resulting from the eventual retirement of large generation facilities.
11.7The commissioners must coordinate this work with representatives of the local government
11.8units that host large generation facilities; the workers at large generation facilities, including
11.9full-time employees and contractors; and the utilities that own large generation facilities.

11.10    Sec. 18. COORDINATED ELECTRIC TRANSMISSION STUDY.
11.11(a) The commissioner of commerce shall request the Midcontinent Independent System
11.12Operator (MISO) to conduct an engineering study of the impacts on reliability and estimated
11.13costs of operational changes and enhancements to the transmission system necessary to
11.14support increased use of carbon-free electrical generation sources for Minnesota and
11.15throughout the MISO footprint, along with the possible eventual retirement of existing
11.16generation resources serving Minnesota customers.
11.17(b) If the request is accepted, MISO is responsible for completing the study work, with
11.18the support of the electric utilities subject to transmission planning under Minnesota Rules,
11.19chapter 7848. Prior to the start of the study, MISO shall appoint a technical review committee
11.20with experience and expertise in electric transmission system engineering, power system
11.21operation, and renewable and carbon-free energy technologies to review the study's proposed
11.22methods, work plan, models, and preliminary and near final results. The technical review
11.23committee shall be chaired by a representative from MISO and include representatives from
11.24Minnesota electric utilities, including one representative from a utility that owns nuclear
11.25generation, one from a generation and transmission cooperative, and one from a municipal
11.26utility. In addition, MISO will work with state utility regulators, as well as stakeholders
11.27from across the electricity industry, nongovernmental organization, consumer advocates,
11.28and labor representatives.
11.29(c) To the extent possible, the study shall integrate and optimize the study and resulting
11.30potential transmission projects with previous and current study efforts, coordinate with
11.31neighboring regions to the MISO footprint and adjacent regional transmission organizations,
11.32and identify barriers, challenges, and opportunities.
11.33(d) The study shall include, but is not limited to:
12.1(1) establishing scenarios for study of increased carbon-free energy resources and energy
12.2storage and retirement of existing generation;
12.3(2) identifying new power system operating challenges and possible mitigation strategies
12.4and areas where new strategies will be required but are not yet discernible;
12.5(3) developing conceptual level plans of the required new and modified transmission,
12.6including timeframes and indicative cost;
12.7(4) identifying when ascertainable, likely new significant transmission projects or
12.8modifications, including timeframes and indicative cost; and
12.9(5) identifying functional requirements for and timeframes when nontransmission
12.10technology may be needed to augment the transmission in conceptual plan and the new
12.11projects or modifications.
12.12(e) The first meeting of the technical review committee shall be held no later than June
12.1315, 2019, and the study should be complete, with a comprehensive report submitted to the
12.14Public Utilities Commission no later than December 1, 2020.

12.15    Sec. 19. EFFECTIVE DATE.
12.16Sections 1 to 18 are effective August 1, 2019, and apply only to dockets initiated at the
12.17Public Utilities Commission on or after that date.