1.1                          A bill for an act 
  1.2             relating to utilities; modifying the conservation 
  1.3             improvement requirements for utilities; requiring 
  1.4             analysis of the conservation improvement program; 
  1.5             amending Minnesota Statutes 1998, section 216B.241, 
  1.6             subdivisions 1, 1a, 1b, 2, 2a, 2b, and by adding 
  1.7             subdivisions. 
  1.8   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.9      Section 1.  Minnesota Statutes 1998, section 216B.241, 
  1.10  subdivision 1, is amended to read: 
  1.11     Subdivision 1.  [DEFINITIONS.] For purposes of this 
  1.12  section, the terms defined in this subdivision have the meanings 
  1.13  given them.  
  1.14     (a) "Commission" means the public utilities commission. 
  1.15     (b) "Commissioner" means the commissioner of public service.
  1.16     (c) "Cost effective" means the cost of the energy savings 
  1.17  is less than the cost to the utility to produce or purchase an 
  1.18  equivalent amount of a new supply of energy. 
  1.19     (d) "Department" means the department of public service. 
  1.20     ~~(d)~~ (e) "Energy conservation improvement" means the 
  1.21  purchase or installation of a device, method, ~~or~~ material, or 
  1.22  project that: 
  1.23     (1) reduces consumption of or increases efficiency in the 
  1.24  use of electricity or natural gas, including, but not limited 
  1.25  to~~:~~, 
  1.26     ~~(1)~~ insulation and ventilation~~;~~, 
  2.1      ~~(2)~~ storm or thermal doors or windows~~;~~, 
  2.2      ~~(3)~~ caulking and weatherstripping~~;~~, 
  2.3      ~~(4)~~ furnace efficiency modifications~~;~~, 
  2.4      ~~(5)~~ thermostat or lighting controls~~;~~, 
  2.5      ~~(6)~~ awnings~~;~~, or 
  2.6      ~~(7)~~ systems to turn off or vary the delivery of energy~~.~~; 
  2.7   ~~The term "energy conservation improvement" includes a device or~~ 
  2.8   ~~method that~~ 
  2.9      (2) creates, converts, or actively uses energy from 
  2.10  renewable sources such as solar, wind, and biomass, provided 
  2.11  that the device or method conforms with national or state 
  2.12  performance and quality standards whenever applicable; 
  2.13     (3) seeks to provide energy savings through reclamation or 
  2.14  recycling and is used as part of the infrastructure of an 
  2.15  electric generation, transmission, or distribution system within 
  2.16  the state or a natural gas distribution system or peak shaving 
  2.17  storage and production facility within the state; and 
  2.18     (4) through research and development, is designed to 
  2.19  research or develop new means or improve existing means of 
  2.20  increasing energy efficiency or conserving energy. 
  2.21     (f) "Facility" means all buildings, structures, and 
  2.22  installations at a single site. 
  2.23     ~~(e)~~ (g) "Investments and expenses of a public utility" 
  2.24  includes the investments and expenses incurred by a public 
  2.25  utility in connection with an energy conservation improvement 
  2.26  including, but not limited to:  
  2.27     (1) the differential in interest cost between the market 
  2.28  rate and the rate charged on a no interest or below market 
  2.29  interest loan made by a public utility to a customer for the 
  2.30  purchase or installation of an energy conservation improvement; 
  2.31     (2) the difference between the utility's cost of purchase 
  2.32  or installation of energy conservation improvements and any 
  2.33  price charged by a public utility to a customer for such 
  2.34  improvements.  
  2.35     (h) "Large electric energy facility" means a facility with 
  2.36  a maximum monthly billed demand of 20,000 kilowatts or more of 
  3.1   electricity during the preceding calendar year. 
  3.2      (i) "Large energy customer" means a customer who purchases 
  3.3   at retail electricity or gas for a large energy facility. 
  3.4      (j) "Large energy facility" means a large electric energy 
  3.5   facility or a large gas energy facility. 
  3.6      (k) "Large gas energy facility" means a facility which has 
  3.7   peak day requirements of 399,000 or more cubic feet of gas. 
  3.8      (l) "Maximum monthly billed demand" means the peak amount 
  3.9   of electricity used by a retail customer during a billing period 
  3.10  measured in kilowatts.  
  3.11     (m) "Peak shaving storage and production facility" means a 
  3.12  facility used to store and produce natural gas or its equivalent 
  3.13  during peak usage times including, but not limited to, 
  3.14  underground storage facilities, liquification and storage 
  3.15  facilities, and facilities used to generate gas from a mixture 
  3.16  of propane and air. 
  3.17     Sec. 2.  Minnesota Statutes 1998, section 216B.241, 
  3.18  subdivision 1a, is amended to read: 
  3.19     Subd. 1a.  [INVESTMENT, EXPENDITURE, AND CONTRIBUTION; 
  3.20  ~~REGULATED~~ PUBLIC UTILITIES.] (a) For purposes of this 
  3.21  subdivision and subdivision 2, "public utility" has the meaning 
  3.22  given it in section 216B.02, subdivision 4.  Each public utility 
  3.23  shall spend and invest for energy conservation improvements 
  3.24  under this subdivision and subdivision 2 the following amounts: 
  3.25     (1) for a utility that furnishes gas service, ~~.5~~ 0.5 
  3.26  percent of its gross operating revenues from service provided in 
  3.27  the state excluding gross operating revenue generated from 
  3.28  service provided in the state at retail to large gas energy 
  3.29  facilities; 
  3.30     (2) for a utility that furnishes electric service, 1.5 
  3.31  percent of its gross operating revenues from service provided in 
  3.32  the state excluding gross operating revenue generated from 
  3.33  service provided in the state at retail to large electric energy 
  3.34  facilities; and 
  3.35     (3) for a utility that furnishes electric service and that 
  3.36  operates a nuclear-powered electric generating plant within the 
  4.1   state, two percent of its gross operating revenues from service 
  4.2   provided in the state excluding gross operating revenue 
  4.3   generated from service provided in the state at retail to large 
  4.4   electric energy facilities.  
  4.5      (b) Each public utility that furnishes electric or gas 
  4.6   service shall spend and invest for each and every large energy 
  4.7   facility in the state served by the utility the following 
  4.8   amounts in energy conservation improvements that benefit a large 
  4.9   energy facility and in any other measures that the commissioner 
  4.10  determines will reduce consumption of energy by or increase the 
  4.11  energy efficiency of a large energy facility, unless the 
  4.12  commission has issued an order pursuant to subdivision 2 
  4.13  exempting the public utility from the requirements of this 
  4.14  paragraph with respect to a specific large energy facility: 
  4.15     (1) for each public utility that furnishes gas service, 
  4.16  0.25 percent of its gross operating revenues from service 
  4.17  provided at retail to the large gas energy facility; and 
  4.18     (2) for a public utility that furnishes electric service, 
  4.19  0.75 percent of its gross operating revenues at retail from 
  4.20  service provided to the large electric energy facility. 
  4.21  Each public utility shall account separately for each large 
  4.22  energy facility served by the public utility the funds required 
  4.23  to be spent and invested under this paragraph on energy 
  4.24  conservation improvements and other measures that benefit the 
  4.25  large energy facility.  Funds spent for conservation 
  4.26  improvements and other measures required under this paragraph 
  4.27  for a large energy facility must be credited against the large 
  4.28  energy facility's account.  If the commissioner determines that 
  4.29  there are not enough cost-effective energy conservation 
  4.30  improvement projects and other measures that benefit a large 
  4.31  energy facility served by a public utility in any year to 
  4.32  exhaust the funds in the large energy facility's account 
  4.33  established under this paragraph, the public utility shall 
  4.34  retain in the account the remaining funds.  Any interest earned 
  4.35  on funds in the account must be credited to the account.  Funds 
  4.36  retained in the account of a large energy facility must be used 
  5.1   in following years to fund energy conservation improvement 
  5.2   projects and other measures that the commissioner determines 
  5.3   will reduce energy consumption or increase energy efficiency and 
  5.4   that benefit the large energy facility, unless the commission 
  5.5   issues an order under subdivision 2 finding that the public 
  5.6   utility is no longer required to make expenditures under this 
  5.7   paragraph for the large energy facility.  Upon issuance of the 
  5.8   order, funds remaining in the large energy facility's account 
  5.9   under this paragraph must be used by the public utility for 
  5.10  energy conservation improvements that benefit customers other 
  5.11  than large energy customers. 
  5.12     (c) The commissioner may require investments or spending 
  5.13  greater than the amounts required under this subdivision for a 
  5.14  public utility whose most recent advance forecast required under 
  5.15  section 216B.2422 or 216C.17 projects a peak demand deficit of 
  5.16  100 megawatts or greater within five years under mid-range 
  5.17  forecast assumptions.  A public utility may appeal a decision of 
  5.18  the commissioner under this paragraph to the commission under 
  5.19  subdivision 2.  In reviewing a decision of the commissioner 
  5.20  under this paragraph, the commission shall rescind the decision 
  5.21  if it finds that the required investments or spending will: 
  5.22     (1) not result in cost-effective programs; or 
  5.23     (2) otherwise not be in the public interest. 
  5.24     ~~(c)~~ (d) Each public utility shall determine what portion of 
  5.25  the amount it sets aside for conservation improvement will be 
  5.26  used for conservation improvements under subdivision 2 ~~and~~, what 
  5.27  portion it will contribute to the energy and conservation 
  5.28  account established in subdivision 2a, and what portion it will 
  5.29  contribute to the energy efficiency research and development 
  5.30  account established in subdivision 2c.  The amount contributed 
  5.31  in any year, if any, to the account established in subdivision 
  5.32  2c, must not exceed five percent of the total amount required to 
  5.33  be spent under this subdivision, and for contributions from a 
  5.34  large energy facility account, not more than five percent of the 
  5.35  amount required to be spent annually for that large energy 
  5.36  facility.  Contributions must be remitted to the commissioner of 
  6.1   public service by February 1 of each year.  Nothing in this 
  6.2   subdivision prohibits a public utility from spending or 
  6.3   investing for energy conservation improvement more than required 
  6.4   in this subdivision. 
  6.5      Sec. 3.  Minnesota Statutes 1998, section 216B.241, 
  6.6   subdivision 1b, is amended to read: 
  6.7      Subd. 1b.  [CONSERVATION IMPROVEMENTS; COOPERATIVES; 
  6.8   MUNICIPALITIES.] (a) This subdivision applies to: 
  6.9      (1) a cooperative electric association that generates and 
  6.10  transmits electricity to associations that provide electricity 
  6.11  at retail including a cooperative electric association not 
  6.12  located in this state that serves associations or others in the 
  6.13  state; 
  6.14     (2) a municipality that provides electric service to retail 
  6.15  customers; and 
  6.16     (3) a municipality with gross operating revenues in excess 
  6.17  of $5,000,000 from sales of natural gas to retail customers.  
  6.18     (b) Each cooperative electric association and municipality 
  6.19  subject to this subdivision shall spend and invest for energy 
  6.20  conservation improvements under this subdivision the following 
  6.21  amounts: 
  6.22     (1) for a municipality, ~~.5~~ 0.5 percent of its gross 
  6.23  operating revenues from the sale of gas and one percent of its 
  6.24  gross operating revenues from the sale of electricity not 
  6.25  purchased from a public utility governed by subdivision 1a or a 
  6.26  cooperative electric association governed by this subdivision; 
  6.27  and 
  6.28     (2) for a cooperative electric association, 1.5 percent of 
  6.29  its gross operating revenues from service provided in the state. 
  6.30  For purposes of this paragraph, gross operating revenue does not 
  6.31  include gross operating revenue from service provided at retail 
  6.32  to large energy facilities, including electric service provided 
  6.33  indirectly to a large electric energy facility by a generation 
  6.34  and transmission cooperative through a distribution cooperative 
  6.35  electric association. 
  6.36     (c) Each cooperative electric association and municipality 
  7.1   subject to this subdivision shall spend and invest for each and 
  7.2   every large energy facility served by the association or 
  7.3   municipality for energy conservation improvements and other 
  7.4   measures that will reduce consumption of energy by or increase 
  7.5   energy efficiency of the large energy facility the following 
  7.6   amounts, unless the commission has issued an order pursuant to 
  7.7   subdivision 2 exempting the association or municipality from the 
  7.8   requirements of this paragraph regarding a specific large energy 
  7.9   facility: 
  7.10     (1) for a municipality, 0.25 percent of its gross operating 
  7.11  revenues from the sale of gas at retail to a large gas energy 
  7.12  facility and 0.75 percent of its gross operating revenues from 
  7.13  the sale of electricity at retail not purchased from a public 
  7.14  utility governed by subdivision 1a or a cooperative electric 
  7.15  association governed by this subdivision to a large electric 
  7.16  energy facility; and 
  7.17     (2) for a cooperative electric association, 0.75 percent of 
  7.18  its gross operating revenues from service provided at retail in 
  7.19  the state to a large electric energy facility served indirectly 
  7.20  by a distribution cooperative electric association. 
  7.21  Each cooperative electric association and municipality shall 
  7.22  account separately for each large energy facility served by the 
  7.23  association or municipality funds required to be spent under 
  7.24  this paragraph.  All funds spent for conservation improvements 
  7.25  and other measures required under this paragraph must be 
  7.26  credited against the large energy facility's account.  If the 
  7.27  cooperative electric association or municipality and large 
  7.28  energy customer determine that there are not enough 
  7.29  cost-effective energy conservation improvement projects or other 
  7.30  measures that benefit the large energy facility in any year to 
  7.31  exhaust the funds in the large energy facility's account 
  7.32  established under this paragraph, the cooperative or 
  7.33  municipality shall retain in the account the remaining funds.  
  7.34  Interest earned on the funds in the account must be credited to 
  7.35  the account.  Funds retained in the account of a large energy 
  7.36  facility must be used in following years to fund energy 
  8.1   conservation improvement projects and other measures that the 
  8.2   association or municipality and large energy customer determine 
  8.3   will reduce energy consumption or increase energy efficiency at 
  8.4   the large energy facility unless the commission has issued an 
  8.5   order that the association or municipality is no longer required 
  8.6   to make expenditures under this paragraph for the large energy 
  8.7   facility.  Upon issuance of the order, any funds credited to the 
  8.8   large facility's account must be used by the association or 
  8.9   municipality that serves the large energy facility for energy 
  8.10  conservation improvements benefiting customers other than large 
  8.11  energy customers. 
  8.12     (d) Each municipality and cooperative association subject 
  8.13  to this subdivision shall identify and implement energy 
  8.14  conservation improvement spending and investments that are 
  8.15  appropriate for the municipality or association.  Each 
  8.16  municipality and cooperative electric association subject to 
  8.17  this subdivision may spend up to five percent of the total 
  8.18  amount per year required to be spent under this subdivision on 
  8.19  energy efficiency and energy conservation research and 
  8.20  development projects funded directly by the municipality or 
  8.21  cooperative electric association.  Funds spent on research and 
  8.22  development from a large energy facility's account must be spent 
  8.23  on projects that could benefit the large energy facility, and 
  8.24  may not exceed five percent of the amount required to be spent 
  8.25  for that large energy facility in a year.  Spending on research 
  8.26  and development allowed under this subdivision is in addition to 
  8.27  any funds contributed to the research and development account 
  8.28  established in subdivision 2c.  Load management may be used to 
  8.29  meet the requirements of this subdivision if it reduces the 
  8.30  demand for or increases the efficiency of electric services.  A 
  8.31  generation and transmission cooperative electric association may 
  8.32  include as spending and investment required under this 
  8.33  subdivision conservation improvement spending and investment by 
  8.34  cooperative electric associations that provide electric service 
  8.35  at retail to consumers and that are served by the generation and 
  8.36  transmission association.  By February 1 of each year, each 
  9.1   municipality or cooperative shall report to the commissioner its 
  9.2   energy conservation improvement spending and investments with a 
  9.3   brief analysis of effectiveness in reducing consumption of 
  9.4   electricity or gas.  The commissioner shall review each report 
  9.5   and make recommendations, where appropriate, to the municipality 
  9.6   or association to increase the effectiveness of conservation 
  9.7   improvement activities.  The commissioner shall also review each 
  9.8   report for whether a portion of the money spent on residential 
  9.9   conservation improvement programs is devoted to programs that 
  9.10  directly address the needs of renters and low-income persons 
  9.11  unless an insufficient number of appropriate programs are 
  9.12  available.  For the purposes of this subdivision and subdivision 
  9.13  2, "low-income" means an income of less than 185 percent of the 
  9.14  federal poverty level. 
  9.15     ~~(d)~~ (e) As part of its spending for conservation 
  9.16  improvement, a municipality or association may contribute to the 
  9.17  energy and conservation account established in subdivision 2a 
  9.18  and to the energy efficiency research and development account 
  9.19  established in subdivision 2c.  The amount contributed in any 
  9.20  year, if any, to the account established in subdivision 2c must 
  9.21  not exceed five percent of the total amount required to be spent 
  9.22  or invested under this subdivision and for contributions from a 
  9.23  large energy facility account, not more than five percent of the 
  9.24  amount required to be spent annually for that large energy 
  9.25  facility.  Any amount contributed must be remitted to the 
  9.26  commissioner ~~of public service~~ by February 1 of each year. 
  9.27     Sec. 4.  Minnesota Statutes 1998, section 216B.241, is 
  9.28  amended by adding a subdivision to read: 
  9.29     Subd. 1d.  [COST-EFFECTIVE INVESTMENT AND SPENDING.] Each 
  9.30  public utility, cooperative electric association, and 
  9.31  municipality subject to subdivision 1a or 1b shall evaluate the 
  9.32  cost effectiveness of its annual spending and investment made 
  9.33  pursuant to this section and report to the commissioner its 
  9.34  findings by January 15 of each year.  A utility is not required 
  9.35  to evaluate and report on funds contributed to the accounts 
  9.36  established under subdivisions 2a and 2c.  Each public utility, 
 10.1   association, and municipality shall include in its report the 
 10.2   cost of energy used in its analysis and any assumptions used in 
 10.3   its analysis. 
 10.4      Sec. 5.  Minnesota Statutes 1998, section 216B.241, 
 10.5   subdivision 2, is amended to read: 
 10.6      Subd. 2.  [PROGRAMS.] (a) The commissioner may by rule 
 10.7   require public utilities to make investments and expenditures in 
 10.8   energy conservation improvements, explicitly setting forth the 
 10.9   interest rates, prices, and terms under which the improvements 
 10.10  must be offered to the customers.  The required programs must 
 10.11  cover a two-year period.  The commissioner shall require at 
 10.12  least one public utility to establish a pilot program to make 
 10.13  investments in and expenditures for energy from renewable 
 10.14  resources such as solar, wind, or biomass and shall give special 
 10.15  consideration and encouragement to programs that bring about 
 10.16  significant net savings through the use of energy-efficient 
 10.17  lighting.  The commissioner shall evaluate the program on the 
 10.18  basis of cost-effectiveness and the reliability of technologies 
 10.19  employed.  The rules of the department must provide to the 
 10.20  extent practicable for a free choice, by consumers participating 
 10.21  in the program, of the device, method, ~~or~~ material, or project 
 10.22  constituting the energy conservation improvement and for a free 
 10.23  choice of the seller, installer, or contractor of the energy 
 10.24  conservation improvement, provided that the device, method, 
 10.25  material, or project seller, installer, or contractor is duly 
 10.26  licensed, certified, approved, or qualified, including under the 
 10.27  residential conservation services program, where applicable.  
 10.28  The commissioner may require a utility to make an energy 
 10.29  conservation improvement investment or expenditure whenever the 
 10.30  commissioner finds that the improvement will result in energy 
 10.31  savings at a total cost to the utility less than the cost to the 
 10.32  utility to produce or purchase an equivalent amount of new 
 10.33  supply of energy.  The commissioner shall nevertheless ensure 
 10.34  that every public utility operate one or more programs under 
 10.35  periodic review by the department.  Load management may be used 
 10.36  to meet the requirements for energy conservation improvements 
 11.1   under this section if it ~~results in a demonstrable reduction in~~ 
 11.2   ~~consumption of energy~~ reduces the demand for or increases the 
 11.3   efficiency of electric services.  Each public utility subject to 
 11.4   this subdivision may spend up to five percent of the total 
 11.5   amount per year required to be spent under this subdivision on 
 11.6   energy efficiency and energy conservation research and 
 11.7   development projects funded directly by the public utility.  
 11.8   Funds spent on research and development from a large energy 
 11.9   facility's account must be spent on projects that could benefit 
 11.10  the large energy facility, and may not exceed five percent of 
 11.11  the amount required to be spent for that large energy facility 
 11.12  in a year.  A public utility that spends and invests funds on 
 11.13  research and development projects in accordance with this 
 11.14  subdivision to meet the conservation improvement spending 
 11.15  requirements of this section does not need approval of the 
 11.16  commissioner or commission to spend or invest in the energy 
 11.17  efficiency and energy conservation projects.  Spending on 
 11.18  research and development allowed under this subdivision is in 
 11.19  addition to any funds contributed to the research and 
 11.20  development account established in subdivision 2c.  The 
 11.21  commissioner shall consider and may require a utility to 
 11.22  undertake a program suggested by an outside source, including a 
 11.23  political subdivision or a nonprofit or community organization.  
 11.24  No utility may make an energy conservation improvement under 
 11.25  this section to a building envelope unless: 
 11.26     (1) it is the primary supplier of energy used for either 
 11.27  space heating or cooling in the building; 
 11.28     (2) the commissioner determines that special circumstances, 
 11.29  ~~which~~ that would unduly restrict the availability of 
 11.30  conservation programs, warrant otherwise; or 
 11.31     (3) the utility has been awarded a contract under 
 11.32  subdivision 2a. 
 11.33     The commissioner shall ensure that a portion of the money 
 11.34  spent on residential conservation improvement programs is 
 11.35  devoted to programs that directly address the needs of renters 
 11.36  and low-income persons unless an insufficient number of 
 12.1   appropriate programs are available.  
 12.2      A utility, a political subdivision, or a nonprofit or 
 12.3   community organization that has suggested a program, the 
 12.4   attorney general acting on behalf of consumers and small 
 12.5   business interests, or a utility customer that has suggested a 
 12.6   program and is not represented by the attorney general under 
 12.7   section 8.33 may petition the commission to modify or revoke a 
 12.8   department decision under this section, and the commission may 
 12.9   do so if it determines that the program is not cost-effective, 
 12.10  does not adequately address the residential conservation 
 12.11  improvement needs of low-income persons, has a long-range 
 12.12  negative effect on one or more classes of customers, or is 
 12.13  otherwise not in the public interest.  The person petitioning 
 12.14  for commission review has the burden of proof.  The commission 
 12.15  shall reject a petition that, on its face, fails to make a 
 12.16  reasonable argument that a program is not in the public interest.
 12.17     (b) Upon petition by a large energy customer or the 
 12.18  commissioner, the commission shall determine whether a large 
 12.19  energy facility in the state has made all available cost 
 12.20  effective energy conservation improvements and other energy 
 12.21  efficiency and conservation measures.  For each petition filed 
 12.22  under this section, the commissioner shall provide to the 
 12.23  commission an evaluation of energy conservation improvements and 
 12.24  other energy efficiency and conservation measures made at the 
 12.25  large energy facility and an evaluation of whether any 
 12.26  additional cost-effective measures exist that could be 
 12.27  undertaken at the large energy facility in the state.  For 
 12.28  purposes of this paragraph only, research and development 
 12.29  projects are not considered energy conservation improvements.  
 12.30  If the commission finds that all available cost-effective energy 
 12.31  conservation improvements and other energy efficiency and 
 12.32  conservation measures have been made at the large energy 
 12.33  facility, the commission shall issue an order exempting the 
 12.34  public utility, cooperative electric association, or 
 12.35  municipality which serves the large energy facility from the 
 12.36  requirement that the utility spend and invest in energy 
 13.1   conservation improvements and other energy efficiency measures 
 13.2   for that large energy facility the amount required in 
 13.3   subdivision 1a, paragraph (b), or subdivision 1b, paragraph (b). 
 13.4   Each public utility shall submit to the department in accordance 
 13.5   with paragraph (a) proposed projects for each large energy 
 13.6   facility for which the commission has not issued an order 
 13.7   exempting the public utility from the requirement to spend and 
 13.8   invest for that facility in accordance with subdivision 1a or 1b.
 13.9      Sec. 7.  Minnesota Statutes 1998, section 216B.241, 
 13.10  subdivision 2a, is amended to read: 
 13.11     Subd. 2a.  [ENERGY AND CONSERVATION ACCOUNT.] The 
 13.12  commissioner must deposit money contributed to the energy and 
 13.13  conservation account under subdivisions 1a and 1b in ~~the energy~~ 
 13.14  ~~and conservation~~ that account in the general fund.  Money in the 
 13.15  account is appropriated to the department for programs designed 
 13.16  to meet the energy conservation needs of low-income persons and 
 13.17  to make energy conservation improvements in areas not adequately 
 13.18  served under subdivision 2.  Interest on money in the account 
 13.19  accrues to the account.  Using information collected under 
 13.20  section 216C.02, subdivision 1, paragraph (b), the commissioner 
 13.21  must, to the extent possible, allocate enough money to programs 
 13.22  for low-income persons to assure that their needs are being 
 13.23  adequately addressed.  The commissioner must request the 
 13.24  commissioner of finance to transfer money from the account to 
 13.25  the commissioner of children, families, and learning for an 
 13.26  energy conservation program for low-income persons.  In 
 13.27  establishing programs, the commissioner must consult political 
 13.28  subdivisions and nonprofit and community organizations, 
 13.29  especially organizations engaged in providing energy and 
 13.30  weatherization assistance to low-income persons.  At least one 
 13.31  program must address the need for energy conservation 
 13.32  improvements in areas in which a high percentage of residents 
 13.33  use fuel oil or propane to fuel their source of home heating.  
 13.34  The commissioner may contract with a political subdivision, a 
 13.35  nonprofit or community organization, a public utility, a 
 13.36  municipality, or a cooperative electric association to implement 
 14.1   its programs.  
 14.2      Sec. 8.  Minnesota Statutes 1998, section 216B.241, 
 14.3   subdivision 2b, is amended to read: 
 14.4      Subd. 2b.  [RECOVERY OF EXPENSES FOR FEES, TAXES, PERMITS.] 
 14.5   The commission shall allow a utility to recover expenses 
 14.6   resulting from a conservation improvement program required by 
 14.7   the department and contributions to the energy and conservation 
 14.8   account established in subdivision 2a and the energy efficiency 
 14.9   research and development account established in subdivision 2c, 
 14.10  unless the recovery would be inconsistent with a financial 
 14.11  incentive proposal approved by the commission.  In addition, a 
 14.12  utility may file annually, or the public utilities commission 
 14.13  may require the utility to file, and the commission may approve, 
 14.14  rate schedules containing provisions for the automatic 
 14.15  adjustment of charges for utility service in direct relation to 
 14.16  changes in the expenses of the utility for real and personal 
 14.17  property taxes, fees, and permits, the amounts of which the 
 14.18  utility cannot control.  A public utility is eligible to file 
 14.19  for adjustment for real and personal property taxes, fees, and 
 14.20  permits under this subdivision only if, in the year previous to 
 14.21  the year in which it files for adjustment, it has spent or 
 14.22  invested at least 1.75 percent of its gross revenues from 
 14.23  provision of electric service other than gross revenues from 
 14.24  service provided at retail in the state to large electric energy 
 14.25  facilities and ~~.6~~ 0.6 percent of its gross revenues from 
 14.26  provision of gas service other than gross revenues from service 
 14.27  provided at retail in the state to large gas energy facilities 
 14.28  for that year for energy conservation improvements under this 
 14.29  section.  
 14.30     Sec. 9.  Minnesota Statutes 1998, section 216B.241, is 
 14.31  amended by adding a subdivision to read: 
 14.32     Subd. 2c.  [ENERGY EFFICIENCY RESEARCH AND DEVELOPMENT 
 14.33  ACCOUNT; PROJECTS.] (a) The commissioner shall deposit money 
 14.34  contributed to the energy efficiency research and development 
 14.35  account under subdivisions 1a and 1b in the energy efficiency 
 14.36  research and development account in the general fund.  Money in 
 15.1   the account is appropriated to the department for research and 
 15.2   development projects with the primary purpose of increasing 
 15.3   energy efficiency or conserving energy.  Interest on money in 
 15.4   the account accrues to the account.  
 15.5      (b) Upon receiving contributions to the energy efficiency 
 15.6   research and development account, the commissioner shall 
 15.7   establish a process for soliciting proposals for research and 
 15.8   development projects to be funded by the account and establish 
 15.9   the terms upon which grants may be made consistent with this 
 15.10  section.  Any person may submit a proposal to the commissioner 
 15.11  including utilities subject to the requirements of this 
 15.12  section.  The commissioner shall review requests and award 
 15.13  grants after the solicitation process has been established on a 
 15.14  biennial basis.  In reviewing the proposals, the commissioner 
 15.15  shall consider the extent to which a proposal for development of 
 15.16  new technology or research seeks to: 
 15.17     (1) increase the energy efficiency of consumer or other 
 15.18  products using gas or electricity; 
 15.19     (2) increase the energy efficiency or reduce energy 
 15.20  consumption of large energy facilities; 
 15.21     (3) increase the efficiency of the electric transmission 
 15.22  system or reduce the size of electric transmission facilities; 
 15.23     (4) increase the energy efficiency of electric generation 
 15.24  facilities; or 
 15.25     (5) otherwise encourage energy efficiency or conservation. 
 15.26     (c) The commissioner shall rank the proposals submitted 
 15.27  each year according to their likelihood to produce substantial 
 15.28  gains in the area of energy efficiency or energy conservation 
 15.29  research or development.  The commissioner may consult with 
 15.30  technical and scientific experts in conducting the ranking. 
 15.31  Based upon the ranking, the commissioner shall recommend to the 
 15.32  commission those projects which it has determined should receive 
 15.33  funding from the energy efficiency research and development fund 
 15.34  and the amount each project should receive.  Notwithstanding the 
 15.35  ranking, funds contributed to the account from a large energy 
 15.36  customer account required under subdivision 1a or 1b, must be 
 16.1   granted only for research and development projects that could 
 16.2   benefit, either directly or indirectly, large energy facilities. 
 16.3      (d) Upon request by the commissioner, the commission shall 
 16.4   review the commissioner's recommendations for approval of 
 16.5   funding of research and development projects under this 
 16.6   subdivision.  The commission shall approve, modify, or reject 
 16.7   the recommended proposals within 60 days.  The commission shall 
 16.8   approve proposals that it determines are designed to promote 
 16.9   energy efficiency or energy conservation. 
 16.10     Sec. 10.  [ANALYSIS OF CONSERVATION IMPROVEMENTS.] 
 16.11     Subdivision 1.  [ANALYSIS OF EXISTING PROGRAM.] (a) 
 16.12  Recognizing that numerous cost-effective energy conservation 
 16.13  improvements have been made by utilities under this section, the 
 16.14  legislature seeks to determine the nature and extent of the 
 16.15  opportunities remaining for utilities to spend and invest in 
 16.16  cost-effective energy conservation improvements by analyzing the 
 16.17  current status of utility spending and investment under this 
 16.18  section.  In futherance of this purpose, the commissioner of the 
 16.19  department of public service shall analyze the effectiveness of 
 16.20  conservation improvements required by section 216B.241 in 
 16.21  meeting the goals of that section.  In conducting the analysis, 
 16.22  the commissioner shall include a review of conservation 
 16.23  improvement expenditures and investments since 1996 by all 
 16.24  utilities, subject to section 216B.241, including cooperative 
 16.25  electric associations and municipal utilities.  The analysis 
 16.26  must address at least the following: 
 16.27     (1) the types of conservation improvement investments and 
 16.28  expenditures that utilities have made and are making to fulfill 
 16.29  the requirements of section 216B.241; 
 16.30     (2) the effectiveness of each type of investment and 
 16.31  expenditure in terms of reducing energy consumption or 
 16.32  increasing energy efficiency; 
 16.33     (3) the cost effectiveness of each type of investment and 
 16.34  expenditure considering the cost of the improvement and the cost 
 16.35  to the utility of the additional energy that would be required 
 16.36  absent the improvement; 
 17.1      (4) the level of investment and expenditure that each 
 17.2   utility has made on conservation improvements as compared to the 
 17.3   minimum required by section 216B.241 at the time of the 
 17.4   investment and expenditure; 
 17.5      (5) how the amount of spending on conservation improvements 
 17.6   benefiting a particular class of customers correlates to the 
 17.7   amount of revenue generated from the class of customers for each 
 17.8   utility subject to section 216B.241; 
 17.9      (6) the percentage of total conservation improvement 
 17.10  spending that has been devoted to programs that directly benefit 
 17.11  renters and low-income persons; 
 17.12     (7) whether all utilities subject to section 216B.241 
 17.13  should be subject to the same requirements in terms of review 
 17.14  and approval of energy conservation improvement investments and 
 17.15  expenditures; and 
 17.16     (8) whether the percentage of gross operating revenues for 
 17.17  each type of utility required to be invested or spent under 
 17.18  section 216B.241 should be adjusted and to what degree, if any, 
 17.19  considering the extent to which opportunities for cost-effective 
 17.20  conservation improvement projects currently exist.  
 17.21  The commissioner shall complete the analysis and report the 
 17.22  findings of the analysis and any recommendations regarding 
 17.23  changes to section 216B.241 by February 15, 2000, to the chairs 
 17.24  of the house of representatives and senate committees and 
 17.25  subcommittees with jurisdiction over electric and gas utilities. 
 17.26     (b) Upon request, any utility subject to section 216B.241 
 17.27  shall provide to the commissioner information relating to 
 17.28  conservation improvements made by the utility that the 
 17.29  commissioner determines is necessary to perform the analysis 
 17.30  required by this section. 
 17.31     Subd. 2.  [REPORT BY COMMISSION.] The public utilities 
 17.32  commission shall report by February 15, 2000, to the chairs of 
 17.33  the house of representatives and senate committees and 
 17.34  subcommittees with jurisdiction over electric and gas utilities 
 17.35  on the proceedings, findings, and recommendations, if any, of 
 17.36  the chair's roundtable on demand-side management convened by the 
 18.1   commission on November 19, 1998.  The report must specifically 
 18.2   include any findings and recommendations of the roundtable 
 18.3   regarding financial incentives under section 216B.16.