5.1. ERMUSR 06-14-2016 - Laserfiche WebLink

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The Omnibus Energy Bill. The Omnibus Energy Bill makes several other major changes to the statutory and regulatory scheme that governs the operation of electric utilities. The Omnibus Energy Bill allows investor-owned utilities ("IOUs"), with the approval of the PUC, to include in their rates the cost of new transmission improvements without going through an expensive general rate case. This authority will provide greater incentive to IOUs to make needed improvements to their transmission systems. The Omnibus Energy Bill modifies several State approval processes involving the construction of large power plants and transmission lines. It transfers the authority for routing transmission lines and siting power plants from the Environmental Quality Board to the PUC, thereby centralizing the need certification and the siting processes in one agency. The law eliminates the limits involved in the need certification and siting processes, provides added criteria to analyze the need for transmission projects, and eliminates the deadline imposed on the PUC for need certification decisions. It is not possible to predict whether the Minnesota State Legislature or Congress will enact further legislation restructuring the electric utility industry or what the substance of any such legislation would be or what the effect might be upon the Utility. Environmental Matters The Utility's generation operations are subject to continuing environmental regulation by the U.S. Environmental Protection Agency (the "EPA"), the Minnesota Pollution Control Agency (the "MPCA") and other regulatory agencies and are in compliance with all regulations. Federal, state and local standards and rules which regulate the environmental impact of generation and transmission facilities used by the Utility are subject to change. These changes may arise from continuing legislative, regulatory and judicial action regarding such standards and rules. Consequently, there is no assurance that the asset in operation or contemplated will remain subject to the regulations currently in effect, will always be in compliance with future regulations, or will always be able to obtain all required operating permits. An inability to comply with environmental standards could result in a reduced operating level or the complete shutdown of individual electric generating units not in compliance. Federal legislation and EPA rule-making have had a significant effect on electric utilities. The Clean Air Act Amendments ("CAA") established requirements to obtain operating permits for an affected facility which set forth emissions limits and other requirements, including monitoring, record keeping and reporting. The CAA also established a regulatory program to address the effects of acid rain and impose restrictions on sulfur dioxide(SO2)and nitrogen oxide(NOx). The EPA has introduced or proposed in recent years various rules to reduce NOx and SO2 emissions on a regional level to achieve ambient air quality standards,reduce hazardous air pollutants from power plants, to reduce regional haze and to regulate the disposal and management of coal combustion by-products. The CAA also requires that the EPA establish National Ambient Air Quality Standards and the regulation of greenhouse gases.Revisions to the Clean Water Act Section 316(a)and(b)may have an impact on the electric utility industry,but the cost at this time is impossible to estimate. The Clean Water Act, Endangered Species Act, and Resource Conservation and Recovery Act currently are scheduled for reauthorization by Congress. The impact of this legislation on the electric utility industry is uncertain; however,no new programs related to the electric utility industry are expected. A number of electrical industry and other studies have been conducted regarding the potential long-term health effects resulting from exposure to electromagnetic fields ("EMF") created by transmission and distribution lines and equipment. At this time, any relationship between EMF and certain adverse health effects remains inconclusive; however, electric utilities have been experiencing challenges in various forms claiming financial damages associated with electric equipment and EMF. At this time, it is not possible to predict the extent of the cost, if any, and other impacts which the EMF concern may have on electric utilities, including the Utility. Up to this point there have been no claims against the Utility related to EMF exposure. -9 - 127