1.1                                         A bill for an act&#10;1.2     relating to energy; requiring utilities to meet certain renewable energy standards; &#10;1.3     amending Minnesota Statutes 2004, section 216B.1691.&#10;1.4      BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:&#10;&#10;<a id="go.0.1.0"></a>1.5          Section 1. Minnesota Statutes 2004, section 216B.1691, is amended to read:&#10;1.6     <b> 216B.1691 RENEWABLE ENERGY </b><ins><b>STANDARDS AND </b></ins><b>OBJECTIVES.</b>&#10;1.7          Subdivision 1. <b>Definitions.</b> (a) Unless otherwise specified in law, "eligible energy &#10;1.8     technology" means an energy technology that:&#10;1.9      (1) generates electricity from the following renewable energy sources:  solar; wind; &#10;1.10    hydroelectric with a capacity of less than 60 megawatts; hydrogen, provided that after &#10;1.11    January 1, 2010, the hydrogen must be generated from the resources listed in this clause; &#10;1.12    or biomass, which includes an energy recovery facility used to capture the heat value of &#10;1.13    mixed municipal solid waste or refuse-derived fuel from mixed municipal solid waste as &#10;1.14    a primary fuel; and&#10;1.15     (2) was not mandated by Laws 1994, chapter 641, or by commission order issued &#10;1.16    pursuant to that chapter prior to August 1, 2001.&#10;1.17     (b) "Electric utility" means a public utility providing electric service, a generation &#10;1.18    and transmission cooperative electric association, or a municipal power agency.&#10;1.19     (c) "Total retail electric sales" means the kilowatt-hours of electricity sold in a year &#10;1.20    by an electric utility to retail customers of the electric utility or to a distribution utility for &#10;1.21    distribution to the retail customers of the distribution utility.&#10;1.22         Subd. 2. <b>Eligible energy objectives.</b> (a) Each electric utility shall make a good &#10;1.23    faith effort to generate or procure sufficient electricity generated by an eligible energy &#10;2.1     technology to provide its retail consumers, or the retail customers of a distribution utility &#10;2.2     to which the electric utility provides wholesale electric service, so that:&#10;2.3      (1) commencing in 2005, at least one percent of the electric utility's total retail &#10;2.4     electric sales is generated by eligible energy technologies;&#10;2.5      (2) the amount provided under clause (1) is increased by one percent of the utility's &#10;2.6     total retail electric sales each year until <del>2015 </del><ins>2010</ins>; and&#10;2.7      (3) <del>ten </del><ins>five </ins>percent of the electric energy provided to retail customers in Minnesota &#10;2.8     <ins>by 2010 </ins>is generated by eligible energy technologies.&#10;2.9      (b) Of the eligible energy technology generation required under paragraph (a), &#10;2.10    clauses (1) and (2), not less than 0.5 percent of the energy must be generated by biomass &#10;2.11    energy technologies, including an energy recovery facility used to capture the heat value &#10;2.12    of mixed municipal solid waste or refuse-derived fuel from mixed municipal solid waste &#10;2.13    as a primary fuel, by 2005.  By 2010, one percent of the eligible technology generation &#10;2.14    required under paragraph (a), clauses (1) and (2), shall be generated by biomass energy &#10;2.15    technologies.  An energy recovery facility used to capture the heat value of mixed &#10;2.16    municipal solid waste or refuse-derived fuel from mixed municipal solid waste, with a &#10;2.17    power sales agreement in effect as of May 29, 2003, that terminates after December 31, &#10;2.18    2010, does not qualify as an eligible energy technology unless the agreement provides for &#10;2.19    rate adjustment in the event the facility qualifies as a renewable energy source.&#10;2.20        <ins>Subd. 2a.</ins> <ins><b>Eligible energy standard.</b></ins> <ins>Each electric utility shall generate or procure </ins>&#10;2.21    <ins>sufficient electricity generated by an eligible energy technology to provide its retail </ins>&#10;2.22    <ins>customers, or the retail customers of a distribution utility to which the electric utility </ins>&#10;2.23    <ins>provides wholesale electric service, so that at least the following percentages of the </ins>&#10;2.24    <ins>electric utility's total retail electric sales is generated by eligible energy technologies </ins>&#10;2.25    <ins>by the end of the year indicated:</ins>&#10;<rs_table>2.26     <ins> (1) </ins>       <ins>2013 </ins>      <ins>ten percent </ins>&#10;2.27     <ins> (2) </ins>       <ins>2015 </ins>       <ins>15 percent </ins>&#10;2.28     <ins> (3) </ins>       <ins>2020 </ins>       <ins>20 percent </ins>&#10;</rs_table>2.29    <ins>To be counted toward satisfying the standard, energy must be generated by a facility </ins>&#10;2.30    <ins>originally placed in service after January 1, 1975.  The commission must delay or modify </ins>&#10;2.31    <ins>the standard for an electric utility if it finds that compliance with a standard is not in </ins>&#10;2.32    <ins>the public interest because compliance will either produce undesirable impacts on the </ins>&#10;2.33    <ins>reliability of the utility's system or on the utility's ratepayers or if it finds that compliance </ins>&#10;2.34    <ins>is not technically feasible.  The standard is both an individual electric utility standard and a </ins>&#10;3.1     <ins>statewide standard so that by the end of 2020 at least 20 percent of the electric energy </ins>&#10;3.2     <ins>provided to retail customers in Minnesota is generated by eligible energy technologies.</ins>&#10;3.3         <del> (c) </del><ins>Subd. 2b.</ins> <b>Commission order.</b>  By June 1, 2004, and as needed thereafter, the &#10;3.4     commission shall issue an order detailing the criteria and standards by which it will &#10;3.5     measure an electric utility's efforts to meet the renewable energy objectives <ins>and standards </ins>&#10;3.6     of this section to determine whether the utility is making the required good faith effort &#10;3.7     <ins>and is meeting the standards</ins>.  In this order, the commission shall include criteria and &#10;3.8     standards that protect against undesirable impacts on the reliability of the utility's system &#10;3.9     and economic impacts on the utility's ratepayers and that consider technical feasibility.&#10;3.10    <del> (d) In its order under paragraph (c), the commission shall provide for a weighted </del>&#10;3.11    <del>scale of how energy produced by various eligible energy technologies shall count toward a </del>&#10;3.12    <del>utility's objective.  In establishing this scale, the commission shall consider the attributes </del>&#10;3.13    <del>of various technologies and fuels, and shall establish a system that grants multiple credits </del>&#10;3.14    <del>toward the objectives for those technologies and fuels the commission determines is in </del>&#10;3.15    <del>the public interest to encourage.</del>&#10;3.16         Subd. 3. <b>Utility plans filed with commission.</b> (a) Each electric utility shall report &#10;3.17    on its plans, activities, and progress with regard to these objectives <ins>and standards </ins>in its &#10;3.18    filings under section 216B.2422 or in a separate report submitted to the commission every &#10;3.19    two years, whichever is more frequent, demonstrating to the commission <del>that </del>the <del>utility is </del>&#10;3.20    <del>making the required good faith </del><ins>utility's </ins>effort <ins>to comply with this section</ins>.  In its resource &#10;3.21    plan or a separate report, each electric utility shall provide a description of:&#10;3.22     (1) the status of the utility's renewable energy mix relative to the <del>good faith </del>&#10;3.23    objective <ins>and standards</ins>;&#10;3.24     (2) efforts taken to meet the objective <ins>and standards</ins>;&#10;3.25     (3) any obstacles encountered or anticipated in meeting the objective <ins>or standards</ins>; &#10;3.26    and&#10;3.27     (4) potential solutions to the obstacles.&#10;3.28     (b) The commissioner shall compile the information provided to the commission &#10;3.29    under paragraph (a), and report to the chairs of the house of representatives and senate &#10;3.30    committees with jurisdiction over energy and environment policy issues as to the progress &#10;3.31    of utilities in the state in increasing the amount of renewable energy provided to retail &#10;3.32    customers, with any recommendations for regulatory or legislative action, by January &#10;3.33    15 of each odd-numbered year.&#10;3.34         Subd. 4. <b>Renewable energy credits.</b> (a) To facilitate compliance with this section, &#10;3.35    the commission, by rule or order, may establish a program for tradable credits for &#10;3.36    electricity generated by an eligible energy technology.  In doing so, the commission shall &#10;4.1     implement a system that constrains or limits the cost of credits, taking care to ensure that &#10;4.2     such a system does not undermine the market for those credits.&#10;4.3      (b) In lieu of generating or procuring energy directly to satisfy the renewable energy &#10;4.4     objective <ins>and standard </ins>of this section, an electric utility may purchase sufficient renewable &#10;4.5     energy credits, issued pursuant to this subdivision, to meet its objective <ins>and standard</ins>.&#10;4.6      (c) Upon the passage of a renewable energy standard, portfolio, or objective in &#10;4.7     a bordering state that includes a similar definition of eligible energy technology or &#10;4.8     renewable energy, the commission may facilitate the trading of renewable energy credits &#10;4.9     between states.&#10;4.10         Subd. 5. <b>Technology based on fuel combustion.</b> (a) Electricity produced by fuel &#10;4.11    combustion may only count toward a utility's objectives <ins>or standards </ins>if the generation &#10;4.12    facility:&#10;4.13     (1) was constructed in compliance with new source performance standards &#10;4.14    promulgated under the federal Clean Air Act for a generation facility of that type; or&#10;4.15     (2) employs the maximum achievable or best available control technology available &#10;4.16    for a generation facility of that type.&#10;4.17     (b) An eligible energy technology may blend or co-fire a fuel listed in subdivision 1, &#10;4.18    paragraph (a), clause (1), with other fuels in the generation facility, but only the percentage &#10;4.19    of electricity that is attributable to a fuel listed in that clause can be counted toward an &#10;4.20    electric utility's renewable energy objectives.&#10;4.21         Subd. 6. <b>Electric utility that owns nuclear generation facility.</b> (a) An electric &#10;4.22    utility that owns a nuclear generation facility, as part of its good faith effort under this &#10;4.23    subdivision and subdivision 2, shall deploy an additional 300 megawatts of nameplate &#10;4.24    capacity of wind energy conversion systems by 2010, beyond the amount of wind energy &#10;4.25    capacity to which the utility is required by law or commission order as of May 1, 2003.  &#10;4.26    At least 100 megawatts of this capacity are to be wind energy conversion systems of two &#10;4.27    megawatts or less, which shall not be eligible for the production incentive under section &#10;4.28    216C.41.  To the greatest extent technically feasible and economic, these 300 megawatts &#10;4.29    of wind energy capacity are to be distributed geographically throughout the state.  The &#10;4.30    utility may opt to own, construct, and operate up to 100 megawatts of this wind energy &#10;4.31    capacity, except that the utility may not own, construct, or operate any of the facilities &#10;4.32    that are under two megawatts of nameplate capacity.  The deployment of the wind energy &#10;4.33    capacity under this subdivision must be consistent with the outcome of the engineering &#10;4.34    study required under Laws 2003, First Special Session chapter 11, article 2, section 21.&#10;4.35     (b) <del>The renewable energy objective set forth in subdivision 2 shall be a requirement </del>&#10;4.36    <del>for the public utility that owns the Prairie Island nuclear generation plant.  The objective is </del>&#10;5.1     <del>a requirement subject to resource planning and least-cost planning requirements in section </del>&#10;5.2     <del>216B.2422</del><del>, unless implementation of the objective can reasonably be shown to jeopardize </del>&#10;5.3     <del>the reliability of the electric system.  The least-cost planning analysis must include the </del>&#10;5.4     <del>costs of ancillary services and other necessary generation and transmission upgrades.</del>&#10;5.5     <del> (c)</del><del> </del>Also as part of its good faith effort under this section, the utility that owns a &#10;5.6     nuclear generation facility is to enter into a power purchase agreement by January 1, 2004, &#10;5.7     for ten to 20 megawatts of biomass energy and capacity at an all-inclusive price not to &#10;5.8     exceed $55 per megawatt-hour, for a project described in section 216B.2424, subdivision &#10;5.9     5, paragraph (e), clause (2).  The project must be operational and producing energy by &#10;5.10    June 30, 2005.&#10;5.11        <ins>Subd. 7.</ins> <ins><b>Compliance.</b></ins> <ins>The commission, on its own motion or upon petition, may </ins>&#10;5.12    <ins>investigate whether an electric utility is in compliance with its standard obligation under </ins>&#10;5.13    <ins>subdivision 2a and if it finds noncompliance may order the electric utility to construct </ins>&#10;5.14    <ins>facilities or purchase credits to achieve compliance. If an electric utility fails to comply </ins>&#10;5.15    <ins>with an order under this subdivision, the commission may impose a financial penalty on </ins>&#10;5.16    <ins>the electric utility in an amount up to the electric utility's estimated cost of compliance.</ins>&#10;