S.F. _____ Section 1. Section 476.6, subsection 22, Code 2011, is 1 amended by adding the following new paragraph: 2 NEW PARAGRAPH . d. A rate-regulated electric utility that 3 was subject to a revenue sharing settlement agreement with 4 regard to its electric base rates as of January 1, 2010, shall 5 file an application for ratemaking principles applicable to the 6 construction of a nuclear generating facility with the board. 7 The application shall comply with the provisions of section 8 476.53. 9 Sec. 2. Section 476.53, Code 2011, is amended to read as 10 follows: 11 476.53 Electric generating and transmission facilities. 12 1. It is the intent of the general assembly to attract 13 the development of electric power generating and transmission 14 facilities within the state in sufficient quantity to ensure 15 reliable electric service to Iowa consumers and provide 16 economic benefits to the state. It is also the intent of the 17 general assembly to encourage rate-regulated public utilities 18 to consider altering existing electric generating facilities, 19 where reasonable, to manage carbon emission intensity in 20 order to facilitate the transition to a carbon-constrained 21 environment. 22 2. a. The general assembly’s intent with regard to the 23 development of electric power generating and transmission 24 facilities, or the significant alteration of an existing 25 generating facility, as provided in this subsection 1 , shall be 26 implemented in a manner that is cost-effective and compatible 27 with the environmental policies of the state, as expressed in 28 Title XI . 29 b. The general assembly’s intent with regard to the 30 reliability of electric service to Iowa consumers, as provided 31 in this subsection 1 , shall be implemented by considering the 32 diversity of the types of fuel used to generate electricity, 33 the availability and reliability of fuel supplies, and the 34 impact of the volatility of fuel costs. 35 -1- LSB 2351SC (1) 84 rn/nh 1/ 13

S.F. _____ 2. It is also the intent of the general assembly to 1 encourage the prudent development of baseload nuclear 2 electric power generation. Nuclear generation has a long-term 3 proven record of providing a safe, reliable, and secure 4 source of electricity in the United States and offers the 5 potential for significant job creation, substantial economic 6 development benefits, and the production of electricity at 7 significantly reduced levels of regulated air emissions when 8 compared to output from other thermal generation sources. 9 Further, the general assembly recognizes that meeting 10 stringent environmental permit requirements is expensive and 11 creates significant cost burdens on customers and employers 12 attributable to the imposition of additional comprehensive 13 and costly regulations by the United States environmental 14 protection agency that dramatically increase costs to 15 customers. Finally, the general assembly recognizes that 16 development of nuclear electric power generation requires 17 significant capital investment and a substantial period of 18 time for successful nuclear generation development, siting, 19 licensing, and deployment. 20 3. a. The board shall specify in advance, by order issued 21 after a contested case proceeding, the ratemaking principles 22 that will apply when the costs of the electric power generating 23 facility or alternate energy production facility are included 24 in regulated electric rates whenever a rate-regulated public 25 utility does any of the following: 26 (1) Files an application pursuant to section 476A.3 to 27 construct do any of the following in Iowa a : 28 (a) Construct a baseload electric power generating facility 29 with a nameplate generating capacity equal to or greater than 30 three hundred megawatts or a . 31 (b) Construct a combined-cycle electric power generating 32 facility , or an . 33 (c) Construct an alternate energy production facility as 34 defined in section 476.42 , or to significantly . 35 -2- LSB 2351SC (1) 84 rn/nh 2/ 13

S.F. _____ (d) Significantly alter an existing generating facility. 1 (i) For purposes of this subparagraph division (d) , a 2 significant alteration of an existing generating facility must, 3 in order to qualify for establishment of ratemaking principles, 4 fall into one of the following categories: 5 (a) (A) Conversion of a coal fueled facility into a gas 6 fueled facility. 7 (b) (B) Addition of carbon capture and storage facilities 8 at a coal fueled facility. 9 (c) (C) Addition of gas fueled capability to a coal fueled 10 facility, in order to convert the facility to one that will 11 rely primarily on gas for future generation. 12 (d) (D) Addition of a biomass fueled capability to a coal 13 fueled facility. 14 (ii) With respect to a significant alteration of an existing 15 generating facility, an original facility shall not be required 16 to be either a baseload or a combined-cycle facility. Only 17 the incremental investment undertaken by a utility under 18 subparagraph divisions (a), (b), (c), or (d) subdivision (i), 19 subparagraph part (A), (B), (C), or (D) shall be eligible to 20 apply the ratemaking principles established by the order issued 21 pursuant to paragraph “e” . Facilities for which advanced 22 ratemaking principles are obtained pursuant to this section 23 shall not be subject to a subsequent board review pursuant to 24 section 476.6, subsection 21 to the extent that the investment 25 has been considered by the board under this section . To the 26 extent an eligible utility has been authorized to make capital 27 investments subject to section 476.6, subsection 21 , such 28 investments shall not be eligible for ratemaking principles 29 pursuant to this section . 30 (2) Expresses its intent to file an application pursuant to 31 section 476A.3 to build a nuclear generating facility including 32 but not limited to small modular reactor technology, or 33 expresses its intent to seek authority pursuant to a combined 34 construction and operating license or an early site permit from 35 -3- LSB 2351SC (1) 84 rn/nh 3/ 13

S.F. _____ the United States nuclear regulatory commission. 1 (2) (3) Leases or owns in Iowa, in whole or in part, a any 2 of the following: 3 (a) A new baseload electric power generating facility with 4 a nameplate generating capacity equal to or greater than three 5 hundred megawatts or a . 6 (b) A combined-cycle electric power generating facility , 7 or a . 8 (c) A new alternate energy production facility as defined 9 in section 476.42 . 10 (d) A new nuclear generating facility including but not 11 limited to small modular reactor technology. 12 b. In determining the applicable ratemaking principles, the 13 board shall not be limited to traditional ratemaking principles 14 or traditional cost recovery mechanisms. 15 (1) Among the principles and mechanisms the board may 16 consider, the board has the authority to approve ratemaking 17 principles proposed by a rate-regulated public utility that 18 provide for reasonable restrictions upon the ability of 19 the public utility to seek a general increase in electric 20 rates under section 476.6 for at least three years after the 21 generating facility begins providing service to Iowa customers. 22 (2) In determining the applicable ratemaking principles for 23 a nuclear generating facility or for a license or permit from 24 the United States nuclear regulatory commission, a ratemaking 25 principles order issued by the board shall incorporate all of 26 the following: 27 (a) Enable the utility to recover upon issuance of the 28 order, through a rider pursuant to a tariff filing, a return 29 on, and a return of all prudent costs associated with, the 30 permitting, licensing, and construction of a nuclear generating 31 facility. The amount of such cost recovery from utility 32 customers shall be reduced by the amount of any funding of such 33 costs borne by the United States department of energy or any 34 other governmental entity, and costs recovered from any joint 35 -4- LSB 2351SC (1) 84 rn/nh 4/ 13

S.F. _____ owners of the nuclear generating facility. A determination of 1 all prudent costs recoverable pursuant to this subparagraph 2 division shall be made and the level and rate of the recovery 3 of such charges reset annually to reflect the level of 4 reasonable costs related to pursuit of United States nuclear 5 regulatory commission authority or construction costs expected 6 to be incurred in the next twelve months. A determination 7 shall also be made of any adjustment required to balance the 8 preceding period’s actual expenditures and financing costs 9 with what had been projected and included in costs recoverable 10 for the preceding period. If applicable, the utility shall 11 report to the board annually the budgeted and actual costs as 12 compared to the estimated total in-service cost of the nuclear 13 generating facility that was presented in the last annual 14 filing, as projected through the expected in-service date of 15 the nuclear generating facility. Following issuance of the 16 board’s ratemaking principles order, the utility shall file an 17 application with the board on an annual basis providing such 18 information, with the understanding that some cost components 19 may be higher than estimated and other cost components may be 20 lower. Each annual proceeding shall be completed by the board 21 within ninety days from the date of filing the application. 22 The complete methodology for determination of prudent costs 23 shall be addressed as a ratemaking principle. All United 24 States nuclear regulatory commission authority costs are 25 to be recovered over a period not to exceed the estimated 26 construction period for a nuclear generating facility as 27 determined by the board. All nuclear generating facility 28 construction costs are to be recovered over a period not 29 to exceed the sum of the estimated construction period for 30 a nuclear unit, plus its useful life as determined by the 31 board. A utility’s commencement of cost collection shall 32 begin promptly after completion of the ratemaking principles 33 proceeding, allowing for such additional time as may be needed 34 by the board to review a compliance rider tariff filing. 35 -5- LSB 2351SC (1) 84 rn/nh 5/ 13

S.F. _____ (b) Enable the utility to recover in rates all prudently 1 incurred expenses and costs, including but not limited to 2 ongoing operations and maintenance costs, decommissioning 3 funding and site restoration costs, and taxes for such a new 4 nuclear generating facility. 5 (c) Base the allowed debt and equity return on a capital 6 structure calculated using the average of the utility’s 7 actual thirteen monthly balances for long-term debt, preferred 8 stock, and common equity. The long-term debt and preferred 9 stock thirteen-month balances shall include adjustments for 10 thirteen-month balances of unamortized discount, premium, 11 expense, and any gain or loss on reacquired securities. The 12 costs of long-term debt and preferred stock shall reflect 13 the actual embedded interest and dividend rate for each 14 issue as well as any annual amortization of unamortized 15 discount, premium, expense, and any gain or loss on reacquired 16 securities. The costs of common equity shall reflect the 17 risks to which the investor’s capital is exposed and not the 18 investor’s source of funds, and the investor-required cost of 19 capital of the rate-regulated utility, and neither directly 20 nor indirectly include additional debt of the rate-regulated 21 utility’s parent or other affiliates in the rate-regulated 22 utility’s capital structure or cost of service. 23 (d) Allow the utility to recover all prudent 24 preconstruction and construction costs incurred if the 25 utility elects not to complete or is precluded from completing 26 construction of the nuclear generating facility. Costs 27 determined to be prudent in prior annual proceedings shall not 28 subsequently be redetermined to be imprudent. The utility 29 shall recover such costs over a period equal to the period 30 during which the costs were incurred or five years, whichever 31 is longer, in a manner to be determined by the board. 32 (e) Allow the utility to recover the net book value of 33 any generating facility that the utility commits to retire 34 in anticipation of the operation of a new nuclear generating 35 -6- LSB 2351SC (1) 84 rn/nh 6/ 13

S.F. _____ facility. The board shall allow for the recovery of a return 1 on, and a return of the book value of, the retired generating 2 facility over a period not greater than the remaining useful 3 life of the facility prior to a determination to retire the 4 facility. 5 c. In determining the applicable ratemaking principles, the 6 board shall make the following findings: 7 (1) The rate-regulated public utility has in effect a 8 board-approved energy efficiency plan as required under section 9 476.6, subsection 16 . 10 (2) The Except for an application for ratemaking principles 11 subject to paragraph “a” , subparagraph (2), the rate-regulated 12 public utility has demonstrated to the board that the public 13 utility has considered other sources for long-term electric 14 supply and that the facility or lease is reasonable when 15 compared to other feasible alternative sources of supply. The 16 rate-regulated public utility may satisfy the requirements of 17 this subparagraph through a competitive bidding process, under 18 rules adopted by the board, that demonstrate the facility or 19 lease is a reasonable alternative to meet its electric supply 20 needs. 21 d. The applicable ratemaking principles shall be determined 22 in a contested case proceeding, which proceeding may be 23 combined with the proceeding for issuance of a certificate 24 conducted pursuant to chapter 476A . 25 e. The order setting forth the applicable ratemaking 26 principles shall be issued prior to the commencement of 27 construction or lease of the facility. 28 f. Following issuance of the order, the rate-regulated 29 public utility shall have the option of proceeding according to 30 either of the following: 31 (1) Withdrawing its application for a certificate pursuant 32 to chapter 476A or withdrawing its ratemaking principles 33 application . 34 (2) Proceeding with the construction or lease of the 35 -7- LSB 2351SC (1) 84 rn/nh 7/ 13

S.F. _____ facility or efforts to pursue United States nuclear regulatory 1 commission authority . 2 g. Notwithstanding any provision of this chapter to the 3 contrary, the ratemaking principles established by the order 4 issued pursuant to paragraph “e” shall be binding with regard 5 to the specific electric power generating facility in any 6 subsequent rate proceeding. 7 h. Any judicial action directly or indirectly resulting 8 in a modification of the board’s ratemaking principles order 9 shall be applied prospectively only. No refunds shall be made 10 of revenues previously collected, unless the board determines 11 such revenues to be in excess of the costs incurred or to be 12 incurred by the utility. With respect to financial commitments 13 made prior to any judicial action directly or indirectly 14 resulting in a modification of the board’s ratemaking 15 principles order, the utility shall recover such costs under a 16 cancellation costs ratemaking principle. 17 4. The utilities board and the consumer advocate may employ 18 additional temporary staff, or may contract for professional 19 services with persons who are not state employees, as the 20 board and the consumer advocate deem necessary to perform 21 required functions as provided in this section , including but 22 not limited to review of power purchase contracts, review of 23 emission plans and budgets, and review of ratemaking principles 24 proposed for construction or lease of a new generating 25 facility , including a new nuclear generating facility or United 26 States nuclear regulatory commission authority . Beginning 27 July 1, 2002, there is appropriated out of any funds in the 28 state treasury not otherwise appropriated, such sums as may 29 be necessary to enable the board and the consumer advocate to 30 hire additional staff and contract for services under this 31 section . The costs of the additional staff and services shall 32 be assessed to the utilities pursuant to the procedure in 33 section 476.10 and section 475A.6 . 34 5. Facilities for which advanced ratemaking principles are 35 -8- LSB 2351SC (1) 84 rn/nh 8/ 13

S.F. _____ obtained pursuant to this section shall not be subject to a 1 subsequent board review pursuant to section 476.6, subsection 2 21, to the extent that the investment has been considered 3 by the board under this section. To the extent an eligible 4 utility has been authorized to make capital investments subject 5 to section 476.6, subsection 21, such investments shall not be 6 eligible for ratemaking principles pursuant to this section. 7 Sec. 3. ELECTRIC UTILITY RATE INCREASES —— MITIGATION 8 STUDY. The utilities board of the utilities division of the 9 department of commerce shall conduct a study to identify 10 the potential impact to customer electric utility rates 11 resulting from recent federal regulations adopted by the United 12 States environmental protection agency, and strategies to 13 mitigate this impact. The study shall be undertaken with the 14 involvement of rate-regulated electric public utilities and 15 other stakeholders identified by the board. The board shall 16 submit a report regarding the results of the study by January 17 1, 2012. 18 EXPLANATION 19 This bill relates to the permitting, licensing, 20 construction, and operation of nuclear generation facilities. 21 The bill provides that it is the intent of the general 22 assembly to encourage the prudent development of baseload 23 nuclear electric power generation, noting that nuclear 24 generation has a long-term proven record of providing a safe, 25 reliable, and secure source of electricity, and offers the 26 potential for significant job creation, substantial economic 27 development benefits, and the production of electricity at 28 significantly reduced levels of regulated air emissions when 29 compared to output from other thermal generation sources. 30 The bill provides that the general assembly also recognizes 31 that meeting stringent environmental permit requirements is 32 expensive and creates significant cost burdens on customers 33 and employers attributable to the imposition of additional 34 comprehensive and costly regulations by the United States 35 -9- LSB 2351SC (1) 84 rn/nh 9/ 13

S.F. _____ environmental protection agency that dramatically increase 1 costs to customers. The bill provides that the general 2 assembly additionally recognizes that development of nuclear 3 electric power generation requires significant capital 4 investment and a substantial period of time for successful 5 nuclear generation development, siting, licensing, and 6 deployment. 7 The bill requires a rate-regulated electric utility that 8 was subject to a revenue sharing settlement agreement with 9 regard to its electric base rates as of January 1, 2010, to 10 file an application for ratemaking principles applicable to the 11 construction of a nuclear generating facility with the Iowa 12 utilities board, and that the application shall comply with the 13 provisions of Code section 476.53. 14 The bill makes significant modifications to Code section 15 476.53 consistent with the potential construction of a nuclear 16 generating facility. The bill provides that the board shall 17 specify in advance the ratemaking principles that will apply 18 when a rate-regulated public utility expresses its intent to 19 file an application pursuant to Code section 476A.3 to build a 20 nuclear generating facility, including but not limited to small 21 modular reactor technology, or expresses its intent to seek 22 authority pursuant to a combined construction and operating 23 license or an early site permit from the United States nuclear 24 regulatory commission, or leases or owns in whole or in part 25 such a facility. 26 The bill provides that in determining the applicable 27 ratemaking principles for a nuclear generating facility or for 28 a license or permit from the United States nuclear regulatory 29 commission, a ratemaking principles order issued by the 30 board shall incorporate several components. The bill states 31 that after the order is issued, the utility may recover from 32 utility customers a return on, and return of all prudent costs 33 associated with, the permitting, licensing, and construction of 34 a facility, reduced by the amount of any funding of such costs 35 -10- LSB 2351SC (1) 84 rn/nh 10/ 13

S.F. _____ borne by the United States department of energy or any other 1 governmental entity, and costs recovered from any joint owners 2 of the nuclear generating facility. The bill provides that 3 the determination of prudent costs and the level and rate of 4 the recovery of charges shall be reset annually to reflect the 5 level of reasonable costs related to pursuit of United States 6 nuclear regulatory commission authority or construction costs 7 expected to be incurred by the utility in the next 12 months. 8 A determination shall also be made of any adjustment required 9 to balance the preceding period’s actual expenditures and 10 financing costs with what had been projected and included in 11 costs recoverable for the preceding period. The bill directs 12 a utility, if applicable, to report to the board annually the 13 budgeted and actual costs as compared to the estimated total 14 in-service cost of the nuclear generating facility that was 15 presented in the last annual filing, as projected through the 16 expected in-service date of the nuclear generating facility. 17 The bill provides that after the order is issued, a utility 18 shall file an application with the board on an annual basis 19 providing the budgeted versus actual cost information, and that 20 each annual proceeding shall be completed by the board within 21 90 days from the date of filing the application. 22 The bill states that all United States nuclear regulatory 23 commission authority costs are to be recovered over a period 24 not to exceed the estimated construction period for a nuclear 25 generating facility as determined by the board, and that all 26 nuclear generating facility construction costs are to be 27 recovered over a period not to exceed the sum of the estimated 28 construction period for a nuclear unit, plus its useful life as 29 determined by the board. The bill also states that a utility’s 30 commencement of cost collection shall begin promptly after 31 completion of the ratemaking principles proceeding, allowing 32 for such additional time as may be needed by the board to 33 review a compliance rider tariff filing. 34 The bill provides that the order shall additionally enable 35 -11- LSB 2351SC (1) 84 rn/nh 11/ 13

S.F. _____ the utility to recover in rates all prudently incurred expenses 1 and costs, including but not limited to ongoing operations and 2 maintenance costs, decommissioning funding and site restoration 3 costs, and taxes for a new nuclear generating facility. 4 Further, the order shall base the allowed debt and equity 5 return on a capital structure calculated using the average 6 of the utility’s actual 13 monthly balances for long-term 7 debt, preferred stock, and common equity, including specified 8 adjustments. The bill states that the costs of long-term 9 debt and preferred stock shall reflect the actual embedded 10 interest and dividend rate for each issue as well as any annual 11 amortization of unamortized discount, premium, expense, and any 12 gain or loss on reacquired securities, and that the cost of 13 common equity shall reflect the risks to which the investor’s 14 capital is exposed and not the investor’s source of funds, and 15 the investor-required cost of capital of the rate-regulated 16 utility, and shall neither directly nor indirectly include 17 additional debt of the rate-regulated utility’s parent or other 18 affiliates in the rate-regulated utility’s capital structure 19 or cost of service. 20 The bill provides that the order shall also allow a utility 21 to recover all prudent preconstruction and construction costs 22 incurred if the utility elects not to complete or is precluded 23 from completing construction of the nuclear generating 24 facility, recovered over a period equal to the period during 25 which the costs were incurred or five years, whichever is 26 longer, and in a manner to be determined by the board. The 27 bill states that the order shall further allow the utility to 28 recover the net book value of any generating facility that the 29 utility commits to retire in anticipation of the operation of 30 a new nuclear generating facility, and that the board shall 31 allow for the recovery of a return on, and return of the book 32 value of, the retired generating facility over a period not 33 greater than the remaining useful life of the facility prior to 34 a determination to retire the facility. 35 -12- LSB 2351SC (1) 84 rn/nh 12/ 13

S.F. _____ The bill exempts a rate-regulated public utility applying 1 for ratemaking principles with regard to a nuclear generating 2 facility from requirements that a utility must demonstrate to 3 the board that it has considered other sources for long-term 4 electric supply and that the facility or a lease of a facility 5 is reasonable when compared to other feasible alternative 6 sources of supply, and removes a provision applicable with 7 regard to any application that a utility may satisfy these 8 requirements. 9 The bill provides that any judicial action directly 10 or indirectly resulting in a modification of the board’s 11 ratemaking principles order shall be applied prospectively 12 only, and that no refunds shall be made of revenues previously 13 collected, unless the board determines such revenues to be in 14 excess of the costs incurred or to be incurred by the utility. 15 The bill directs the board to conduct a study to identify 16 the potential impact to customer electric utility rates 17 resulting from recent federal regulations adopted by the United 18 States environmental protection agency, and strategies to 19 mitigate this impact. The study shall be undertaken with the 20 involvement of rate-regulated electric public utilities and 21 other stakeholders identified by the board. The bill requires 22 the board to submit a report regarding the results of the study 23 by January 1, 2012. 24 The bill makes additional conforming changes and relocation 25 of specified provisions consistent with expanding applicable 26 ratemaking principles in connection with a nuclear generating 27 facility. 28 -13- LSB 2351SC (1) 84 rn/nh 13/ 13