1.1    .................... moves to amend H. F. No. 3977 as follows:
1.2Delete everything after the enacting clause and insert:

1.3    "Section 1. Minnesota Statutes 2006, section 216B.16, subdivision 7b, is amended to
1.5    Subd. 7b. Transmission cost adjustment. (a) Notwithstanding any other provision
1.6of this chapter, the commission may approve a tariff mechanism for the automatic
1.7annual adjustment of charges for the Minnesota jurisdictional costs of new transmission
1.8facilities that have been separately filed and reviewed and approved by the commission
1.9under section 216B.243, or are certified as a priority project or deemed to be a priority
1.10transmission project under section 216B.2425, or are charges from a regional transmission
1.11organization that are incurred by the utility for network integration transmission facilities
1.12owned by other transmission owners.
1.13    (b) Upon filing by a public utility or utilities providing transmission service, the
1.14commission may approve, reject, or modify, after notice and comment, a tariff that:
1.15    (1) allows the utility to recover on a timely basis the costs net of revenues of
1.16facilities approved under section 216B.243 or certified or deemed to be certified under
1.17section 216B.2425 or exempt from the requirements of section 216B.243;
1.18    (2) allows the utility to recover on a timely basis the charges from a regional
1.19transmission organization that are incurred by the utility for network integration
1.20transmission facilities owned by other transmission owners;
1.21    (3) allows a return on investment at the level approved in the utility's last general
1.22rate case, unless a different return is found to be consistent with the public interest;
1.23    (3) (4) provides a current return on construction work in progress, provided that
1.24recovery from Minnesota retail customers for the allowance for funds used during
1.25construction is not sought through any other mechanism;
1.26    (4) (5) allows for recovery of other expenses if shown to promote a least-cost project
1.27option or is otherwise in the public interest;
2.1    (5) (6) allocates project costs appropriately between wholesale and retail customers;
2.2    (6) (7) provides a mechanism for recovery above cost, if necessary to improve the
2.3overall economics of the project or projects or is otherwise in the public interest; and
2.4    (7) (8) terminates recovery once costs have been fully recovered or have otherwise
2.5been reflected in the utility's general rates.
2.6    (c) A public utility may file annual rate adjustments to be applied to customer bills
2.7paid under the tariff approved in paragraph (b). In its filing, the public utility shall provide:
2.8    (1) a description of and context for the facilities included for recovery;
2.9    (2) a schedule for implementation of applicable projects;
2.10    (3) the utility's costs for these projects;
2.11    (4) a description of the utility's efforts to ensure the lowest costs to ratepayers for
2.12the project; and
2.13    (5) calculations to establish that the rate adjustment is consistent with the terms
2.14of the tariff established in paragraph (b).
2.15    (d) Upon receiving a filing for a rate adjustment pursuant to the tariff established in
2.16paragraph (b), the commission shall approve the annual rate adjustments provided that,
2.17after notice and comment, the costs included for recovery through the tariff were or are
2.18expected to be prudently incurred and achieve transmission system improvements at the
2.19lowest feasible and prudent cost to ratepayers.

2.20    Sec. 2. Minnesota Statutes 2006, section 216B.1645, subdivision 1, is amended to read:
2.21    Subdivision 1. Commission authority. Upon the petition of a public utility, the
2.22Public Utilities Commission shall approve or disapprove power purchase contracts,
2.23investments, or expenditures entered into or made by the utility to satisfy the wind and
2.24biomass mandates contained in sections 216B.169, 216B.2423, and 216B.2424, and
2.25to satisfy the renewable energy objectives obligations set forth in section 216B.1691,
2.26including reasonable investments and expenditures made to:
2.27    (1) transmit the electricity generated from sources developed under those sections
2.28that is ultimately used to provide service to the utility's retail customers, including
2.29studies necessary to identify new transmission facilities needed to transmit electricity to
2.30Minnesota retail customers from generating facilities constructed to satisfy the renewable
2.31energy objectives obligations, provided that the costs of the studies have not been
2.32recovered previously under existing tariffs and the utility has filed an application for a
2.33certificate of need or for certification as a priority project under section 216B.2425 for the
2.34new transmission facilities identified in the studies;
3.1    (2) provide ancillary services to generation facilities that satisfy the renewable
3.2energy objectives and standards, including, but not limited to, storage facilities for
3.3renewable energy that contribute to the reliability, efficiency, or economics of the
3.4renewable facilities; or
3.5    (2) (3) develop renewable energy sources from the account required in section
3.6116C.779 .

3.7    Sec. 3. Minnesota Statutes 2006, section 216B.1645, subdivision 2, is amended to read:
3.8    Subd. 2. Cost recovery. The expenses incurred by the utility over the duration of
3.9the approved contract or useful life of the investment and expenditures made pursuant
3.10to section 116C.779 shall be recoverable from the ratepayers of the utility, to the extent
3.11they are not offset by utility revenues attributable to the contracts, investments, or
3.12expenditures. Upon petition by a public utility, the commission shall approve or approve
3.13as modified a rate schedule providing for the automatic adjustment of charges to recover
3.14the expenses or costs approved by the commission under subdivision 1, which, in the case
3.15of transmission expenditures, are limited to the portion of actual transmission costs that are
3.16directly allocable to the need to transmit power from the renewable sources of energy. The
3.17commission may not approve recovery of the costs for that portion of the power generated
3.18from sources governed by this section that the utility sells into the wholesale market.

3.19    Sec. 4. Minnesota Statutes 2007 Supplement, section 216B.1645, subdivision 2a,
3.20is amended to read:
3.21    Subd. 2a. Cost recovery for owned renewable facilities. (a) A utility may petition
3.22the commission to approve a rate schedule that provides for the automatic adjustment of
3.23charges to recover prudently incurred investments, expenses, or costs associated with
3.24facilities constructed, owned, or operated by a utility to satisfy the requirements of section
3.25216B.1691 , provided those facilities were previously approved by the commission under
3.26section 216B.2422, or 216B.243, or 216B.243, subdivision 9. The commission may
3.27approve, or approve as modified, a rate schedule that:
3.28    (1) allows a utility to recover directly from customers on a timely basis the costs of
3.29qualifying renewable energy projects, including:
3.30    (i) return on investment;
3.31    (ii) depreciation;
3.32    (iii) ongoing operation and maintenance costs;
3.33    (iv) taxes; and
4.1    (v) costs of transmission and other ancillary expenses directly allocable to
4.2transmitting electricity generated from a project meeting the specifications of this
4.4    (2) provides a current return on construction work in progress, provided that recovery
4.5of these costs from Minnesota ratepayers is not sought through any other mechanism;
4.6    (3) allows recovery of other expenses incurred that are directly related to a renewable
4.7energy project, including but not limited to expenses for energy storage, provided that the
4.8utility demonstrates to the commission's satisfaction that the expenses improve project
4.9economics, ensure project implementation, or facilitate coordination with the development
4.10of transmission necessary to transport energy produced by the project to market;
4.11    (4) allocates recoverable costs appropriately between wholesale and retail customers;
4.12    (5) terminates recovery when costs have been fully recovered or have otherwise
4.13been reflected in a utility's rates.
4.14    (b) A petition filed under this subdivision must include:
4.15    (1) a description of the facilities for which costs are to be recovered;
4.16    (2) an implementation schedule for the facilities;
4.17    (3) the utility's costs for the facilities;
4.18    (4) a description of the utility's efforts to ensure that costs of the facilities are
4.19reasonable and were prudently incurred; and
4.20    (5) a description of the benefits of the project in promoting the development of
4.21renewable energy in a manner consistent with this chapter.

4.22    Sec. 5. Minnesota Statutes 2006, section 216B.2425, subdivision 2, is amended to read:
4.23    Subd. 2. List development; transmission projects report. (a) By November
4.241 of each odd-numbered year, a transmission projects report must be submitted to the
4.25commission by each utility, organization, or company that:
4.26    (1) is a public utility, a municipal utility, a cooperative electric association, the
4.27generation and transmission organization that serves each utility or association, or a
4.28transmission company; and
4.29    (2) owns or operates electric transmission lines in Minnesota.
4.30    (b) The report may be submitted jointly or individually to the commission.
4.31    (c) The report must:
4.32    (1) list specific present and reasonably foreseeable future inadequacies in the
4.33transmission system in Minnesota;
5.1    (2) identify alternative means of addressing each inadequacy listed, including, at
5.2the option of the utility, transmission facilities upgrades for which the utility will seek
5.3certification, but which are not large energy facilities under section 216B.2421;
5.4    (3) identify general economic, environmental, and social issues associated with
5.5each alternative; and
5.6    (4) provide a summary of public input related to the list of inadequacies and the role
5.7of local government officials and other interested persons in assisting to develop the list
5.8and analyze alternatives.
5.9    (d) To meet the requirements of this subdivision, reporting parties may rely on
5.10available information and analysis developed by a regional transmission organization
5.11or any subgroup of a regional transmission organization and may develop and include
5.12additional information as necessary.

5.13    Sec. 6. Minnesota Statutes 2006, section 216B.243, subdivision 8, is amended to read:
5.14    Subd. 8. Exemptions. This section does not apply to:
5.15    (1) cogeneration or small power production facilities as defined in the Federal Power
5.16Act, United States Code, title 16, section 796, paragraph (17), subparagraph (A), and
5.17paragraph (18), subparagraph (A), and having a combined capacity at a single site of less
5.18than 80,000 kilowatts; plants or facilities for the production of ethanol or fuel alcohol; or
5.19any case where the commission has determined after being advised by the attorney general
5.20that its application has been preempted by federal law;
5.21    (2) a high-voltage transmission line proposed primarily to distribute electricity to
5.22serve the demand of a single customer at a single location, unless the applicant opts to
5.23request that the commission determine need under this section or section 216B.2425;
5.24    (3) the upgrade to a higher voltage of an existing transmission line that serves
5.25the demand of a single customer that primarily uses existing rights-of-way, unless the
5.26applicant opts to request that the commission determine need under this section or section
5.27216B.2425 ;
5.28    (4) a high-voltage transmission line of one mile or less required to connect a new or
5.29upgraded substation to an existing, new, or upgraded high-voltage transmission line;
5.30    (5) conversion of the fuel source of an existing electric generating plant to using
5.31natural gas; or
5.32    (6) the modification of an existing electric generating plant to increase efficiency,
5.33as long as the capacity of the plant is not increased more than ten percent or more than
5.34100 megawatts, whichever is greater; or.
6.1    (7) a large energy facility that (i) generates electricity from wind energy conversion
6.2systems, (ii) will serve retail customers in Minnesota, (iii) is specifically intended to be
6.3used to meet the renewable energy objective under section 216B.1691or addresses a
6.4resource need identified in a current commission-approved or commission-reviewed
6.5resource plan under section 216B.2422, and (iv) derives at least ten percent of the total
6.6nameplate capacity of the proposed project from one or more C-BED projects, as defined
6.7under section 216B.1612, subdivision 2, paragraph (f).

6.8    Sec. 7. Minnesota Statutes 2006, section 216B.243, is amended by adding a
6.9subdivision to read:
6.10    Subd. 9. Renewable energy standard facilities. The requirements of this
6.11section do not apply to a generation facility that is intended to be used to meet or
6.12exceed the obligations of section 216B.1691; provided that, after notice and comment,
6.13the commission determines that the facility is a reasonable and prudent approach to
6.14meeting the utility's obligations under that section. When making this determination,
6.15the commission may consider the size of the facility relative to the utility's total need
6.16for renewable resources, alternative approaches for supplying the renewable energy to
6.17be supplied by the proposed facility, the facility's ability to promote rural economic
6.18development, maintain electric system reliability, and minimize costs to consumers, and
6.19other criteria as the commission may determine are relevant."