1.1                          A bill for an act 
  1.2             relating to utilities; enacting Minnesota responsible 
  1.3             electric competition act; proposing coding for new law 
  1.4             as Minnesota Statutes, chapter 216E. 
  1.5   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.6      Section 1.  [216E.01] [DEFINITIONS.] 
  1.7      Subdivision 1.  [SCOPE.] Certain terms in this chapter have 
  1.8   the meanings given them in this section. 
  1.9      Subd. 2.  [COMMISSION.] "Commission" means the Minnesota 
  1.10  public utilities commission. 
  1.11     Subd. 3.  [DEPARTMENT.] "Department" means the department 
  1.12  of public service. 
  1.13     Subd. 4.  [EFFECTIVE COMPETITION.] "Effective competition" 
  1.14  means the inability of a supplier to exercise market power in a 
  1.15  market that does not have regulated prices. 
  1.16     Subd. 5.  [ELECTRIC POWER.] "Electric power" means energy 
  1.17  measured in kilowatt-hours and electrical capacity measured in 
  1.18  kilowatts provided to final or intermediate customers, together 
  1.19  with any ancillary services necessary for their provision to 
  1.20  final customers. 
  1.21     Subd. 6.  [MAPP.] "MAPP" means the Mid Area Continent Power 
  1.22  Pool or its successor organization. 
  1.23     Subd. 7.  [MARKET POWER.] "Market power" means the ability 
  1.24  of a seller to materially change prevailing market prices and by 
  1.25  so doing profitably maintain prices in excess of economic cost, 
  2.1   including a competitive return on capital. 
  2.2      Subd. 8.  [NERC.] "NERC" means the North American Electric 
  2.3   Reliability Council or successor organization, which defines and 
  2.4   requires standards and procedures to secure the reliability, 
  2.5   integrity, and stability of the interconnected electric grid. 
  2.6      Subd. 9.  [RELEVANT REGULATORY AUTHORITY.] "Relevant 
  2.7   regulatory authority" means the Minnesota public utilities 
  2.8   commission in matters that are not under federal jurisdiction 
  2.9   but are assigned to the state by this chapter.  In matters that 
  2.10  are not under federal jurisdiction and that are not assigned to 
  2.11  the state by this chapter, "relevant regulatory authority" means 
  2.12  either the board of directors of a distribution cooperative that 
  2.13  does not elect to be rate regulated by the state, or the duly 
  2.14  delegated municipal authority of a municipal utility. 
  2.15     Subd. 10.  [RETAIL COMPETITION.] "Retail competition" means 
  2.16  a regulatory regime in which electric energy as measured in 
  2.17  kilowatt-hours and electric generation capacity as measured in 
  2.18  kilowatts may be provided at market-determined prices to a 
  2.19  Minnesota retail customer, regardless of the customer's 
  2.20  location, by a certified vendor.  In this regime, electric 
  2.21  services that are not subject to effective competition, 
  2.22  including but not limited to the physical transmission of 
  2.23  electricity at high voltages, the distribution of electricity, 
  2.24  and any generation and ancillary services that can only be 
  2.25  supplied economically by regulated entities, continue to be 
  2.26  provided under prices, terms, and conditions of service 
  2.27  regulated by the relevant regulatory authority or, in matters 
  2.28  fully under federal jurisdiction, by the Federal Energy 
  2.29  Regulatory Commission. 
  2.30     Subd. 11.  [TRANSITION COSTS.] "Transition costs" mean new 
  2.31  utility expenses and investments entailed by the implementation 
  2.32  of retail competition. 
  2.33     Sec. 2.  [216E.02] [LEGISLATIVE FINDINGS; TITLE.] 
  2.34     (a) The legislature finds that: 
  2.35     (1) Minnesota currently enjoys among the lowest electric 
  2.36  utility rates in the nation, and that Minnesota's low electric 
  3.1   rates have promoted the state's economic vitality by enhancing 
  3.2   consumer well-being, the creation and maintenance of jobs and 
  3.3   high levels of employment, and the attraction and development of 
  3.4   commerce. 
  3.5      (2) These low rates are and have been compatible with a 
  3.6   high level of reliability and safety in providing electric 
  3.7   service, while protecting consumers, ensuring service for 
  3.8   low-income citizens, increasing environmental responsibility in 
  3.9   the production of electricity, and encouraging and developing 
  3.10  energy efficiency and renewable energy. 
  3.11     (3) Despite these benefits, Congress is considering bills 
  3.12  that would require retail competition for electric services in 
  3.13  all states, including Minnesota, and some states are 
  3.14  implementing their own forms of retail competition.  It is 
  3.15  therefore appropriate to prepare for the possible imposition or 
  3.16  adoption of retail competition in Minnesota by identifying 
  3.17  potential problems that retail competition may create and 
  3.18  developing means to prevent or mitigate those problems should it 
  3.19  become necessary to do so. 
  3.20     (4) Reliability related to the security, stability, and 
  3.21  coordination of the regional electric grid may be compromised by 
  3.22  retail competition to the extent competition is inconsistent 
  3.23  with the current best utility practices, including but not 
  3.24  limited to control area operations, NERC and MAPP operating 
  3.25  guides, and regional power flow modeling and planning. 
  3.26     (5) Retail competition may create fundamental changes in 
  3.27  how electricity is conveyed from producers to final consumers, 
  3.28  including changes in who those producers are and where their 
  3.29  power sources are located.  These changes may be incompatible 
  3.30  with the way utilities currently carry out control area 
  3.31  operations and other functions necessary for reliable utility 
  3.32  service. 
  3.33     (6) Reliability related to the maintenance and operation of 
  3.34  the electric distribution system may be threatened by 
  3.35  insufficient or inappropriate investments in maintenance and 
  3.36  upgrades of the system or portions of the system, by 
  4.1   distribution company responsibility for implementing reliability 
  4.2   requirements on behalf of independent providers of electric 
  4.3   power, and by premature requirements that alternative providers 
  4.4   be able to offer metering services to distribution utility 
  4.5   customers. 
  4.6      (7) The safety of utility workers, consumers, and the 
  4.7   general public is dependent on reliable, predictable, and 
  4.8   standardized electric operating procedures that could be 
  4.9   jeopardized by retail competition to the extent that competition 
  4.10  introduces practices and incentives that conflict with current 
  4.11  means of ensuring worker and consumer safety. 
  4.12     (8) Retail competition may result in higher prices because 
  4.13  of an insufficient number of low-cost competitors or other 
  4.14  market defects that allow the exercise of market power, a 
  4.15  national or regional market clearing price that is greater than 
  4.16  current utility rates, bypass by some customers of utility costs 
  4.17  and any resulting shift of those costs to other customers, and 
  4.18  substantial utility investments in new procedures or equipment 
  4.19  incurred in transition to retail competition. 
  4.20     (9) Retail competition could create consumer confusion, 
  4.21  foster deceptive or false advertising and other consumer abuses, 
  4.22  jeopardize the provision of universal service, and remove 
  4.23  essential consumer and low-income safeguards. 
  4.24     (10) Retail competition may harm the natural and economic 
  4.25  environment by encouraging increased emissions of air and other 
  4.26  pollutants at existing and new generating facilities and the 
  4.27  duplicative or otherwise inefficient construction of additional 
  4.28  power lines. 
  4.29     (11) Retail competition may delay the development of 
  4.30  economically competitive renewable energy technologies and 
  4.31  resources and may inhibit the beneficial adoption of 
  4.32  energy-efficient technologies by certain customers or customer 
  4.33  groups. 
  4.34     (12) Uncertainty regarding whether the federal government 
  4.35  will require all states to adopt retail competition is an 
  4.36  insufficient reason for Minnesota to impose the risks associated 
  5.1   with retail competition on its consumers and its economy without 
  5.2   taking sufficient steps to ensure that implementation of retail 
  5.3   competition in the state will maintain or improve the low 
  5.4   consumer prices, reliable and universally available service, and 
  5.5   environmental responsibility of Minnesota's electric industry. 
  5.6      (b) In light of these findings, the legislature enacts this 
  5.7   chapter, to be known as the Minnesota Responsible Electric 
  5.8   Competition Act, to reduce the risks that federally mandated 
  5.9   retail electric competition may entail. 
  5.10     Sec. 3.  [216E.03] [RELATION TO FEDERAL LAW; CONDITIONS.] 
  5.11     Subdivision 1.  [APPLICABILITY.] This section applies only 
  5.12  when the federal government enacts legislation that requires the 
  5.13  implementation of retail competition by the states.  If 
  5.14  implementation is required, the public utilities commission 
  5.15  shall implement this section within one year of the date of 
  5.16  enactment of the federal legislation and this section supersedes 
  5.17  any inconsistent portions of this chapter or other law.  Any 
  5.18  provisions of this section that are directly incompatible with 
  5.19  the federal legislation must be maintained until the end of any 
  5.20  period of transition to retail competition allowed by the 
  5.21  federal legislation.  Any provisions of this section that are 
  5.22  not directly incompatible with the federal legislation continue 
  5.23  in effect to structure Minnesota's implementation of the federal 
  5.24  legislation. 
  5.25     Subd. 2.  [PURPOSE.] The purpose of this section is to 
  5.26  prepare the state of Minnesota to comply with any federally 
  5.27  mandated electric retail competition in a manner that preserves 
  5.28  or enhances the reliability, safety, low electricity prices, 
  5.29  consumer protection, and environmental responsibility of 
  5.30  Minnesota's retail electric industry.  This section is to be 
  5.31  construed as permitting the exercise of all valid, legal, and 
  5.32  appropriate state actions in all matters that are not expressly 
  5.33  prohibited by federal law before, during, and after any 
  5.34  transition to retail competition. 
  5.35     Subd. 3.  [RELIABILITY OF ELECTRIC TRANSMISSION GRID.] 
  5.36  Retail competition may be implemented in Minnesota only in a 
  6.1   manner that the commission determines is consistent with 
  6.2   necessary utility reliability practices and that will preserve 
  6.3   or enhance the reliable and efficient operation and use of the 
  6.4   regional electric grid. 
  6.5      Subd. 4.  [RELIABILITY AND EFFICIENCY OF ELECTRIC 
  6.6   DISTRIBUTION SYSTEM.] Retail competition may not be implemented 
  6.7   in Minnesota until adequate means of ensuring distribution 
  6.8   reliability and efficiency have been identified and established 
  6.9   by the relevant regulatory authority. 
  6.10     Subd. 5.  [SAFETY.] Retail competition may not be 
  6.11  implemented in Minnesota until adequate means of ensuring 
  6.12  worker, consumer, and public safety have been identified and 
  6.13  established by the relevant regulatory authority. 
  6.14     Subd. 6.  [ENSURANCE OF LOW PRICES.] The implementation of 
  6.15  retail competition must include the following provisions to 
  6.16  prevent price increases: 
  6.17     (a) The commission shall require all public utilities to 
  6.18  propose and adopt profit-sharing plans as approved, or modified 
  6.19  and approved, by the commission.  These plans must ensure that 
  6.20  utility profits from sales made at market prices in excess of 
  6.21  the utility's cost-based rates are shared between owners and 
  6.22  customers so that competition provides lower prices for 
  6.23  customers and increased value for shareholders. 
  6.24     (b) In order to limit the exercise of market power, the 
  6.25  commission shall continue to set just and reasonable maximum 
  6.26  rates that public utilities can charge Minnesota customers, 
  6.27  while allowing utilities the flexibility to offer reduced prices 
  6.28  in order to respond to competition.  The commission shall set 
  6.29  maximum rates until it finds that all the regional markets for 
  6.30  delivered electric power are subject to effective competition. 
  6.31     (c) The commission is authorized to remedy undue 
  6.32  concentration of ownership or control in electric markets by 
  6.33  requiring divestiture of utility assets or by other means that 
  6.34  effectively eliminate the exercise of market power, and to 
  6.35  prevent behavior that is intended to or that does harm 
  6.36  competition, including pricing below incremental cost and 
  7.1   cross-subsidization of competitive services by customers of 
  7.2   noncompetitive services, by appropriate means, including the 
  7.3   divestiture or complete functional separation of affiliated 
  7.4   interests. 
  7.5      (d) The relevant regulatory authority is authorized to 
  7.6   permit a utility to levy charges on a customer who chooses an 
  7.7   alternate electric power provider.  These charges must not 
  7.8   recover costs other than unavoidable and unmitigable financial 
  7.9   obligations incurred by the utility to produce or procure 
  7.10  electric power for the customer, nor shall they recover more 
  7.11  than the difference between the rate at which the utility 
  7.12  provided service to the customer and the utility's incremental 
  7.13  cost of providing electric power to the customer.  These charges 
  7.14  may only be imposed if the relevant regulatory authority 
  7.15  determines that, without the imposition of the charge, other 
  7.16  customers would be legally obligated to pay for the unavoidable 
  7.17  and unmitigated utility obligations. 
  7.18     (e) The commission shall allocate public utility transition 
  7.19  costs to customers in proportion to the price reductions 
  7.20  customers receive due to competition.  Transition costs may not 
  7.21  be recovered from retail customers of public utilities who do 
  7.22  not receive lower prices due to competition. 
  7.23     Subd. 7.  [CONSUMER PROTECTION.] The implementation of 
  7.24  retail competition in Minnesota must comply with the following 
  7.25  requirements: 
  7.26     (a) Full, complete, and verifiable information on price, 
  7.27  fees, and all relevant terms and conditions of service must be 
  7.28  presented to consumers in writing by competing vendors of 
  7.29  electric power before any contract or agreement for service may 
  7.30  be entered into. 
  7.31     (b) Utility service under current terms and conditions of 
  7.32  service and at rates found just and reasonable before 
  7.33  implementing retail competition must remain available to 
  7.34  consumers who do not choose to select alternative providers, or 
  7.35  for whom alternative providers offer less attractive options. 
  7.36     (c) The commission shall require all vendors to follow fair 
  8.1   business practices to protect consumers from unfair, abusive, 
  8.2   fraudulent, or anticompetitive business practices. 
  8.3      Subd. 8.  [CONSUMER PROTECTION.] During and after any 
  8.4   transition to retail competition, low-income consumers must have 
  8.5   access to affordable and economically priced electric services 
  8.6   and have continuous service during periods when the weather 
  8.7   makes electric service a necessity of life.  Implementation of 
  8.8   retail competition in Minnesota must include the following: 
  8.9      (1) extreme weather protection against service 
  8.10  disconnection for residential low-income electric customers; 
  8.11     (2) universal service provisions, including programs and 
  8.12  mechanisms that enable low-income electric customers to manage 
  8.13  and afford essential electricity requirements; 
  8.14     (3) service safeguards and protections that maintain or 
  8.15  improve the quality, convenience, and responsiveness of electric 
  8.16  service for all residential customers, including low-income 
  8.17  electric customers; and 
  8.18     (4) prohibitions against and sanctions for discrimination 
  8.19  by electric vendors and by utilities against certain residential 
  8.20  customers or customer groups because of differences in income or 
  8.21  other personal or household characteristics.  Discrimination 
  8.22  among otherwise similar customers is not allowed with regard to 
  8.23  prices, access to service, credit and collection policies, and 
  8.24  customer service. 
  8.25     Subd. 9.  [ENVIRONMENTAL SAFEGUARDS.] Full state 
  8.26  environmental review is necessary to ensure that the following 
  8.27  environmental safeguards are met: 
  8.28     (1) all applicable state and federal laws and regulations 
  8.29  regarding emission reductions, offsets, or fees are met by all 
  8.30  existing and new generating facilities; 
  8.31     (2) any new generating facilities create no greater 
  8.32  environmental costs than alternative generating facilities with 
  8.33  cost and technical operating characteristics similar to those of 
  8.34  the proposed unit or units; and 
  8.35     (3) new generating facilities and power lines are sited in 
  8.36  accordance with a comprehensive region-wide analysis capable of 
  9.1   determining the optimum economic siting and configuration of the 
  9.2   facilities. 
  9.3      Subd. 10.  [RENEWABLE ENERGY DEVELOPMENT.] (a) The 
  9.4   introduction of retail competition must include statewide 
  9.5   renewable energy development plans, developed by utilities, 
  9.6   vendors, customers, and other interested parties and approved by 
  9.7   the commission, that will apply equally to all competing 
  9.8   electric power vendors.  These plans must identify renewable 
  9.9   energy development goals that are in the public interest. 
  9.10     (b) All vendors of electric power shall demonstrate 
  9.11  compliance with these plans by developing and filing with the 
  9.12  commission for approval renewable energy market development 
  9.13  plans.  The commission shall approve a renewable energy market 
  9.14  development plan if it finds that it utilizes market procurement 
  9.15  and pricing mechanisms designed to minimize the cost of 
  9.16  renewable energy, and that it will be used to develop new 
  9.17  renewable energy resources consistent with the renewable energy 
  9.18  development goals in paragraph (a).  A vendor shall implement 
  9.19  these plans by distributing the cost of renewable energy 
  9.20  development across all of the vendor's retail customers in 
  9.21  proportion to energy sales, except to the extent that voluntary 
  9.22  subscription programs defray all or a part of the cost.  The 
  9.23  commission may approve petitions of similar vendors to file 
  9.24  joint renewable energy development plans if it finds that the 
  9.25  plans would enable the vendors to achieve the renewable energy 
  9.26  goals at a lower cost to consumers. 
  9.27     Subd. 11.  [ENERGY EFFICIENCY IMPROVEMENTS.] Implementation 
  9.28  of retail competition must continue the state's commitment to 
  9.29  the development of the efficient end-use of electricity.  The 
  9.30  commission and the department shall jointly develop guidelines 
  9.31  and procedures to be used to ensure that all retail customers 
  9.32  have access to economically and technologically efficient design 
  9.33  services, procedures, and equipment.  These guidelines and 
  9.34  procedures must: 
  9.35     (1) be compatible with retail competition as it is 
  9.36  implemented in Minnesota; 
 10.1      (2) focus on the adoption of cost-effective and efficient 
 10.2   design services, procedures, and equipment that are not 
 10.3   delivered effectively to some or all customers by the market 
 10.4   alone; and 
 10.5      (3) include ongoing monitoring and evaluation procedures to 
 10.6   ensure that any state-approved energy efficiency programs focus 
 10.7   appropriately on the most cost-effective opportunities for 
 10.8   various Minnesota utility customers. 
 10.9      Subd. 12.  [UNBUNDLING.] (a) The commission shall require 
 10.10  all investor-owned utilities to submit plans to unbundle rates 
 10.11  to allow prices for delivered electric power to be determined 
 10.12  competitively, subject to the provisions of subdivisions 3 to 
 10.13  11, while ensuring that rates for distribution, transmission, 
 10.14  and noncompetitive generation and ancillary services are just, 
 10.15  reasonable, and nondiscriminatory.  
 10.16     (b) The relevant regulatory authority shall not allow 
 10.17  metering services to be selected by customers from a vendor 
 10.18  other than the distribution utility unless it finds that such 
 10.19  selection would produce no increase in metering, billing, or 
 10.20  other costs for the distribution utility or any of its customers.
 10.21     Subd. 13.  [CERTIFICATION.] No vendor or provider of 
 10.22  deregulated electric services may serve a Minnesota customer 
 10.23  unless the commission has first certified that the provider has 
 10.24  complied with the following requirements: 
 10.25     (a) The vendor meets all reliability, operating, 
 10.26  transmission, interconnection, and any other requirements of 
 10.27  NERC, MAPP, or successor organization, and of any independent 
 10.28  system operator established in the MAPP region. 
 10.29     (b) The vendor complies with relevant federal laws and 
 10.30  regulations regarding transmission prices, business separation, 
 10.31  and provision of information required in Federal Energy 
 10.32  Regulatory Commission (FERC) orders 888 and 889. 
 10.33     (c) The vendor provides customers with a clear, accurate, 
 10.34  and reliable representation of the prices and other terms and 
 10.35  conditions of service offered.  Each offering of service must 
 10.36  include the option of supplying service for a period of three or 
 11.1   more years, and a price schedule showing the guaranteed maximum 
 11.2   price that will be charged for this option. 
 11.3      (d) The vendor offers the same prices, terms, and 
 11.4   conditions of services to all similarly situated customers 
 11.5   without exclusion or limitation. 
 11.6      (e) The vendor has undertaken sufficient contractual or 
 11.7   other obligations to ensure that customers will receive the 
 11.8   offered service or be fully compensated for damages due to 
 11.9   nonperformance by the vendor. 
 11.10     (f) The vendor complies with the relevant requirements of 
 11.11  subdivisions 3 to 12.  A certificate, once awarded, must be 
 11.12  revoked if the commission finds, upon complaint or its own 
 11.13  motion, that the vendor has failed to materially meet the 
 11.14  requirements of this subdivision. 
 11.15     No vendor may renew an existing service arrangement or 
 11.16  acquire new customers in the state for a period of one year if 
 11.17  its certificate is revoked. 
 11.18     Subd. 14.  [BALANCED REPRESENTATION IN RULEMAKING.] In any 
 11.19  rulemaking necessary to implement any provision of this section, 
 11.20  the commission shall ensure that there is adequate participation 
 11.21  by consumers, municipal utilities, cooperative utilities, and 
 11.22  environmental organizations.