House File 2399 - Reprinted HOUSE FILE 2399 BY COMMITTEE ON COMMERCE (SUCCESSOR TO HF 2100) (As Amended and Passed by the House March 2, 2010 ) A BILL FOR An Act requiring certain rate-regulated public utilities to 1 undertake analyses of and preparation for the possible 2 construction of low carbon emitting nuclear generating 3 facilities in this state, permitting all rate-regulated 4 public utilities to make significant alterations to an 5 existing generating facility, and including effective date 6 provisions. 7 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 8 HF 2399 (4) 83 rn/sc/mb

H.F. 2399 Section 1. Section 476.6, Code Supplement 2009, is amended 1 by adding the following new subsection: 2 NEW SUBSECTION . 22. a. It is the intent of the general 3 assembly to require certain rate-regulated public utilities 4 to undertake analyses of and preparations for the possible 5 construction of nuclear generating facilities in this state 6 that would be beneficial in a carbon-constrained environment. 7 b. A rate-regulated electric utility that was subject to 8 a revenue sharing settlement agreement with regard to its 9 electric base rates as of January 1, 2010, shall recover, 10 through a rider and pursuant to a tariff filing made on or 11 before December 31, 2013, the reasonable and prudent costs of 12 its analyses of and preparations for the possible construction 13 of facilities of the type referenced in paragraph “a” . Cost 14 recovery shall be accomplished by instituting a revenue 15 increase applied in the same percentage amount to each customer 16 class and not designed to recover, on an annual basis, more 17 than five-tenths percent of the electric utility’s calendar 18 year 2009 revenues attributable to billed base rates in this 19 state. At the conclusion of the cost recovery period, which 20 shall extend no more than thirty-six months in total, the board 21 shall conduct a contested case proceeding pursuant to chapter 22 17A to evaluate the reasonableness and prudence of the cost 23 recovery. The utility shall file such information with the 24 board as the board deems appropriate, including the filing 25 of an annual report identifying and explaining expenditures 26 identified in the rider as items for cost recovery, and 27 any other information required by the board. If the board 28 determines that the utility has imprudently incurred costs, or 29 has incurred costs that are less than the amount recovered, the 30 board shall order the utility to modify the rider to adjust the 31 amount recoverable. 32 c. Costs that may be recovered through the rider described 33 in paragraph “b” shall be consistent with the United States 34 nuclear regulatory guide, section 4.7, general site suitability 35 -1- HF 2399 (4) 83 rn/sc/mb 1/ 7

H.F. 2399 criteria for nuclear power stations, revision two, April 1998, 1 including costs related to the study and use of sites for 2 nuclear generation. 3 Sec. 2. Section 476.53, Code 2009, is amended to read as 4 follows: 5 476.53 Electric generating and transmission facilities. 6 1. It is the intent of the general assembly to attract 7 the development of electric power generating and transmission 8 facilities within the state in sufficient quantity to ensure 9 reliable electric service to Iowa consumers and provide 10 economic benefits to the state. It is also the intent of the 11 general assembly to encourage rate-regulated public utilities 12 to consider altering existing electric generating facilities, 13 where reasonable, to manage carbon emission intensity in 14 order to facilitate the transition to a carbon-constrained 15 environment. 16 2. a. The general assembly’s intent with regard to the 17 development of electric power generating and transmission 18 facilities, or the significant alteration of an existing 19 generating facility as provided in subsection 1, shall be 20 implemented in a manner that is cost-effective and compatible 21 with the environmental policies of the state, as expressed in 22 Title XI. 23 b. The general assembly’s intent with regard to the 24 reliability of electric service to Iowa consumers, as provided 25 in subsection 1, shall be implemented by considering the 26 diversity of the types of fuel used to generate electricity, 27 the availability and reliability of fuel supplies, and the 28 impact of the volatility of fuel costs. 29 3. For purposes of this section , unless the context 30 otherwise requires, the terms “cogeneration pilot project 31 facility” , “energy sales agreement” , “qualified cogeneration 32 pilot project facility” , and “utility-owned cogeneration pilot 33 project facility” mean the same as defined in section 15.269 . 34 4. 3. a. The board shall specify in advance, by order 35 -2- HF 2399 (4) 83 rn/sc/mb 2/ 7

H.F. 2399 issued after a contested case proceeding, the ratemaking 1 principles that will apply when the costs of the electric 2 power generating facility , or alternate energy production 3 facility , cogeneration pilot project facility, or energy sales 4 agreement are included in regulated electric rates whenever a 5 rate-regulated public utility does any of the following: 6 (1) Files an application pursuant to section 476A.3 to 7 construct in Iowa a baseload electric generating facility 8 with a nameplate generating capacity equal to or greater than 9 three hundred megawatts or a combined-cycle electric power 10 generating facility, or an alternative energy production 11 facility as defined in section 476.42 , or to significantly 12 alter an existing generating facility . For purposes of 13 this subparagraph, a significant alteration of an existing 14 generating facility must, in order to qualify for establishment 15 of ratemaking principles, fall into one of the following 16 categories: 17 (a) Conversion of a coal fueled facility into a gas fueled 18 facility. 19 (b) Addition of carbon capture and storage facilities at a 20 coal fueled facility. 21 (c) Addition of gas fueled capability to a coal fueled 22 facility, in order to convert the facility to one that will 23 rely primarily on gas for future generation. 24 (d) Addition of a biomass fueled capability to a coal fueled 25 facility. 26 With respect to a significant alteration of an existing 27 generating facility, an original facility shall not be required 28 to be either a baseload or a combined-cycle facility. Only 29 the incremental investment undertaken by a utility under 30 subparagraph divisions (a), (b), (c), or (d) shall be eligible 31 to apply the ratemaking principles established by the order 32 issued pursuant to paragraph “e” . Facilities for which advanced 33 ratemaking principles are obtained pursuant to this section 34 shall not be subject to a subsequent board review pursuant to 35 -3- HF 2399 (4) 83 rn/sc/mb 3/ 7

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

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

H.F. 2399 of ratemaking principles proposed for construction or lease 1 of a new generating facility or a cogeneration pilot project 2 facility . Beginning July 1, 2002, there is appropriated out 3 of any funds in the state treasury not otherwise appropriated, 4 such sums as may be necessary to enable the board and the 5 consumer advocate to hire additional staff and contract for 6 services under this section. The costs of the additional staff 7 and services shall be assessed to the utilities pursuant to the 8 procedure in section 476.10 and section 475A.6. 9 6. a. A qualified cogeneration pilot project facility 10 may file a petition with the board for a determination of the 11 avoided cost of an electric utility as provided in the federal 12 Public Utility Regulatory Policies Act of 1978 and related 13 federal regulations, if such a determination has not been made 14 within the last twenty-four months or if there is reason to 15 believe the avoided cost has changed. 16 b. The board shall issue its determination of the electric 17 utility’s avoided cost within one hundred twenty days after the 18 petition is filed. 19 c. The board, for good cause shown, may extend the deadline 20 for issuing the decision for an additional period not to exceed 21 one hundred twenty days. 22 d. The board shall not issue a decision under this 23 subsection without providing notice and an opportunity for 24 hearing. 25 e. The utilities board and the consumer advocate may employ 26 additional temporary staff, or may contract for professional 27 services with persons who are not state employees, as the 28 board and the consumer advocate deem necessary to perform 29 required functions as provided in this subsection . There 30 is appropriated out of any funds in the state treasury not 31 otherwise appropriated, such sums as may be necessary to enable 32 the board and the consumer advocate to hire additional staff 33 and contract for services under this section . The costs of the 34 additional staff and services shall be assessed to the electric 35 -6- HF 2399 (4) 83 rn/sc/mb 6/ 7