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TCAAP Energy Integration Resiliency Framework <br />Policy White Paper – Policy and Regulation Overview <br /> <br /> 48 <br />both are subject to regulatory oversight in exchange for being granted exclusive retail service <br />territories.25 In contrast, district heating and cooling systems are not subject to state regulation. <br />The Minnesota Public Utilities Commission (PUC) regulates both service standards and rates. Utilities <br />are required to provide “adequate, efficient, and reasonable service” and in turn are allowed to <br />recover reasonable and prudent expenses through rates set equally ac ross their service territory. This <br />balance is weighed by the PUC, with input from the Minnesota Department of Commerce, Division of <br />Energy Resources, and the Attorney General. The PUC has latitude and ultimate authority to determine <br />prudent investments, in line with the goals of Minnesota state policy. <br />This has important implications for the energy development at TCAAP: <br /> Xcel Energy is restricted from making higher cost infrastructure investments (e.g. in <br />distribution infrastructure, smart meters) that are not determined to be prudent, or whose <br />benefits would only accrue locally to customers at the TCAAP site. However, piloting or <br />demonstrating such systems to the benefit of all customers would be allowed. <br /> Customer or third-party owned electricity systems above 1 MW are subject to broad <br />regulatory oversight on a number of issues including the amounts paid for excess generation, <br />interconnection requirements, and standby rates. This would include, for example, a third - <br />party owned CHP system. <br /> Customer-owned systems under 1 MW in size are subject to a more supportive regulatory <br />environment. Minnesota law requires utilities to allow for "net metering" of these facilities, <br />requiring payment from the utility for electricity sent back to the grid.26 <br />The utility would also be required to file a certificate of need for any utility-controlled large energy <br />facilities on the site, which would require approval by the PUC. These facilities would include <br />transmission lines, substations, or utility generation. The certificate of need would have to show both <br />the need for the service being provided by the infrastructure and justify the level of investment being <br />proposed, for example, justifying the expense for undergrounding distribution lines. <br />8.2. Overview of Existing Policies and Programs <br />Future energy investments at the TCAAP site will be strengthened if developers make full utilization of <br />existing programs. While programs will likely change over the course of development, with new <br /> <br />25 Electricity may be sold to customers only by the utility assigned to that exclusive territory, except in limited circumstances. Natural gas <br />utilities are not assigned exclusive territories, but since the Public Utilities Commission is required to prevent unnecessary duplication of <br />gas delivery infrastructure, this becomes the de facto operation. <br />26 Solar facilities over 40kW and under 1MW are restricted to 120% of the customer’s annual electricity use, and wind facilities of the <br />same size restricted to 120% of the customer’s maximum annual demand.