H.F. 2399 Section 1. Section 476.53, Code 2009, is amended to read as 1 follows: 2 476.53 Electric generating and transmission facilities. 3 1. It is the intent of the general assembly to attract 4 the development of electric power generating and transmission 5 facilities within the state in sufficient quantity to ensure 6 reliable electric service to Iowa consumers and provide 7 economic benefits to the state. 8 2. a. The general assembly’s intent with regard to the 9 development of electric power generating and transmission 10 facilities, as provided in subsection 1, shall be implemented 11 in a manner that is cost-effective and compatible with the 12 environmental policies of the state, as expressed in Title XI. 13 b. The general assembly’s intent with regard to the 14 reliability of electric service to Iowa consumers, as provided 15 in subsection 1, shall be implemented by considering the 16 diversity of the types of fuel used to generate electricity, 17 the availability and reliability of fuel supplies, and the 18 impact of the volatility of fuel costs. 19 3. For purposes of this section , unless the context 20 otherwise requires, the terms “cogeneration pilot project 21 facility” , “energy sales agreement” , “qualified cogeneration 22 pilot project facility” , and “utility-owned cogeneration pilot 23 project facility” mean the same as defined in section 15.269 . 24 4. 3. a. The board shall specify in advance, by order 25 issued after a contested case proceeding, the ratemaking 26 principles that will apply when the costs of the an electric 27 power generating facility , or alternate energy production 28 facility , cogeneration pilot project facility, or energy sales 29 agreement are included in regulated electric rates whenever a 30 rate-regulated public utility does any of the following: 31 (1) Files an application pursuant to section 476A.3 to 32 construct in Iowa a baseload electric power generating facility 33 with a nameplate generating capacity equal to or greater than 34 three hundred megawatts or a combined-cycle electric power 35 -1- LSB 5790HV (2) 83 rn/sc 1/ 5

H.F. 2399 generating facility, or an alternate energy production facility 1 as defined in section 476.42. 2 (2) Leases or owns in Iowa, in whole or in part, a new 3 baseload electric power generating facility with a nameplate 4 generating capacity equal to or greater than three hundred 5 megawatts or a combined-cycle electric power generating 6 facility, or a new alternate energy production facility as 7 defined in section 476.42. 8 (3) Enters into an agreement for the purchase of the 9 electric power output of a qualified cogeneration pilot project 10 facility or constructs a utility-owned cogeneration pilot 11 project facility pursuant to section 15.269 . 12 b. In determining the applicable ratemaking principles, 13 the board shall not be limited to traditional ratemaking 14 principles or traditional cost recovery mechanisms. Among the 15 principles and mechanisms the board may consider, the board 16 has the authority to approve ratemaking principles proposed by 17 a rate-regulated public utility that provide for reasonable 18 restrictions upon the ability of the public utility to seek 19 a general increase in electric rates under section 476.6 for 20 at least three years after the generating facility begins 21 providing service to Iowa customers. 22 c. In determining the applicable ratemaking principles, the 23 board shall make the following findings: 24 (1) The rate-regulated public utility has in effect a 25 board-approved energy efficiency plan as required under section 26 476.6, subsection 16. 27 (2) The rate-regulated public utility has demonstrated to 28 the board that the public utility has considered other sources 29 for long-term electric supply and that the facility , or lease , 30 or cogeneration pilot project facility is reasonable when 31 compared to other feasible alternative sources of supply. The 32 rate-regulated public utility may satisfy the requirements of 33 this subparagraph through a competitive bidding process, under 34 rules adopted by the board, that demonstrate the facility , 35 -2- LSB 5790HV (2) 83 rn/sc 2/ 5

H.F. 2399 energy sales agreement, or lease is a reasonable alternative to 1 meet its electric supply needs. 2 d. The applicable ratemaking principles shall be determined 3 in a contested case proceeding, which proceeding may be 4 combined with the proceeding for issuance of a certificate 5 conducted pursuant to chapter 476A. 6 e. The order setting forth the applicable ratemaking 7 principles shall be issued prior to the commencement of 8 construction or lease of the facility , or execution of an 9 energy sales agreement related to the cogeneration pilot 10 project facility . 11 f. Following issuance of the order, the rate-regulated 12 public utility shall have the option of proceeding according to 13 either of the following: 14 (1) Withdrawing its application for a certificate pursuant 15 to chapter 476A. 16 (2) Proceeding with the construction or lease of the 17 facility or implementation of an energy sales agreement related 18 to a cogeneration pilot project facility . 19 g. Notwithstanding any provision of this chapter to the 20 contrary, the ratemaking principles established by the order 21 issued pursuant to paragraph “e” shall be binding with regard to 22 the specific electric power generating facility or cogeneration 23 pilot project facility in any subsequent rate proceeding. 24 5. 4. The utilities board and the consumer advocate 25 may employ additional temporary staff, or may contract 26 for professional services with persons who are not state 27 employees, as the board and the consumer advocate deem 28 necessary to perform required functions as provided in this 29 section, including but not limited to review of power purchase 30 contracts, review of emission plans and budgets, and review 31 of ratemaking principles proposed for construction or lease 32 of a new generating facility or a cogeneration pilot project 33 facility . Beginning July 1, 2002, there is appropriated out 34 of any funds in the state treasury not otherwise appropriated, 35 -3- LSB 5790HV (2) 83 rn/sc 3/ 5

H.F. 2399 such sums as may be necessary to enable the board and the 1 consumer advocate to hire additional staff and contract for 2 services under this section. The costs of the additional staff 3 and services shall be assessed to the utilities pursuant to the 4 procedure in section 476.10 and section 475A.6. 5 6. a. A qualified cogeneration pilot project facility 6 may file a petition with the board for a determination of the 7 avoided cost of an electric utility as provided in the federal 8 Public Utility Regulatory Policies Act of 1978 and related 9 federal regulations, if such a determination has not been made 10 within the last twenty-four months or if there is reason to 11 believe the avoided cost has changed. 12 b. The board shall issue its determination of the electric 13 utility’s avoided cost within one hundred twenty days after the 14 petition is filed. 15 c. The board, for good cause shown, may extend the deadline 16 for issuing the decision for an additional period not to exceed 17 one hundred twenty days. 18 d. The board shall not issue a decision under this 19 subsection without providing notice and an opportunity for 20 hearing. 21 e. The utilities board and the consumer advocate may employ 22 additional temporary staff, or may contract for professional 23 services with persons who are not state employees, as the 24 board and the consumer advocate deem necessary to perform 25 required functions as provided in this subsection . There 26 is appropriated out of any funds in the state treasury not 27 otherwise appropriated, such sums as may be necessary to enable 28 the board and the consumer advocate to hire additional staff 29 and contract for services under this section . The costs of the 30 additional staff and services shall be assessed to the electric 31 utility pursuant to the procedure in sections 476.10 and 32 475A.6 . 33 EXPLANATION 34 This bill modifies provisions applicable to electric 35 -4- LSB 5790HV (2) 83 rn/sc 4/ 5

H.F. 2399 generating and transmission facilities. 1 The bill expands current legislative intent regarding the 2 development of electric power generating and transmission 3 facilities to ensure reliable electric service. The bill 4 provides that reliability of service should take into 5 account the diversity of the types of fuel used to generate 6 electricity, the availability and reliability of fuel supplies, 7 and the impact of the volatility of fuel costs. 8 Additionally, the bill deletes outdated provisions 9 referencing a cogeneration pilot program which was repealed 10 effective July 1, 2007. 11 -5- LSB 5790HV (2) 83 rn/sc 5/ 5