A. As used in this section: “Biogas” has the same meaning as set forth in § 56-248.1. “Biogas facilities” means biogas reserves; production facilities, including equipment required to prepare the biogas for use; gathering of, transmission of, and, within the natural gas utility’s certificated service territory, any distribution pipelines necessary to deliver the reserves; and aboveground and underground storage used in the delivery of gas to existing natural gas transmission pipelines or distribution systems. “Biogas supply investment plan” or “plan” means a plan filed by a natural gas utility that identifies proposed eligible biogas supply infrastructure projects and its development of those projects with or without a third party. “Eligible biogas supply infrastructure costs” includes the investment in eligible biogas supply infrastructure projects and the following:
1. Return on the investment. In calculating the return on the investment, the Commission shall use the natural gas utility’s regulatory capital structure in effect during the construction period of the eligible biogas supply infrastructure project. The regulatory capital structure shall be calculated utilizing the weighted average cost of capital, including the cost of debt and the cost of equity, plus an additional 100 basis points added to the cost of equity. If the natural gas utility’s cost of capital underlying the base rates in effect at the time its proposed eligible biogas supply infrastructure project is filed has not been changed by order of the Commission within the preceding five years, the Commission may require the natural gas utility to file an updated weighted average cost of capital, and the natural gas utility may propose an updated weighted average cost of capital. The natural gas utility may recover the external costs associated with establishing its updated weighted average cost of capital through a biogas supply rider. Such external costs shall include legal costs and consultant costs;
2. A revenue conversion factor. Such factor, including income taxes, shall be applied to the required operating income resulting from the eligible biogas supply infrastructure costs;
3. Operating and maintenance expenses. These expenses include the amount of operating and maintenance expenses utilized in biogas collection; processing the gas produced; and gathering, transmission, and distribution lines delivering the gas to a pipeline or distribution system;
4. Depreciation. In calculating depreciation, the Commission shall use the natural gas utility’s current depreciation rates for investments in distribution infrastructure, as set out by the appropriate asset class. The natural gas utility shall propose a basis for recovering for the depreciation or depletion of investments in other asset classes in the biogas supply investment plan, including investments in biogas reserves that will deplete based on their useful life or of associated facilities that may be retired upon depletion of biogas reserves;
5. Property tax and any other taxes or government fees associated with production and transmission of biogas; and
6. Carrying costs on the over-recovery or under-recovery of the eligible biogas supply infrastructure costs. In calculating the carrying costs, the Commission shall use the natural gas utility’s regulatory capital structure as determined in subdivision 1. “Eligible biogas supply infrastructure projects” or “projects” means capital investments in biogas facilities that, alone or in combination with other projects or strategies, offer reasonably anticipated benefits to customers and markets, which benefits mean (i) a reduction in methane or carbon dioxide equivalent emissions from the biogas facility, (ii) an additional source of supply for the natural gas utility, and (iii) a beneficial use for the biogas, and which benefits do not result in the gas delivered to customers failing to meet the natural gas utility’s pipeline quality standards. “Investment” means actual costs incurred on eligible biogas supply infrastructure projects, including planning, development, and construction costs; actual costs of infrastructure associated therewith; and an allowance for funds used during construction. In calculating the allowance for funds used during construction, the Commission shall use the natural gas utility’s actual regulatory capital structure as determined in subdivision 1 of the definition of “eligible biogas supply infrastructure costs.” “Natural gas utility” means an investor-owned public service company engaged in the business of furnishing natural gas service to the public.
B. A natural gas utility shall have the right to recover eligible biogas supply infrastructure costs on an ongoing basis through the gas cost component of the natural gas utility’s rate structure or other recovery mechanism approved by the Commission, provided that any such mechanism shall properly allocate costs. Natural gas utilities using the cost of service methodology set forth in § 56-235.2 or a performance-based regulation plan authorized by § 56-235.6 shall be eligible to file a plan. The plan shall include a timeline for the investment and completion of the proposed eligible biogas supply infrastructure projects; provide for an estimated schedule for recovery of the related eligible biogas supply infrastructure costs through the gas cost component of the natural gas utility’s rate structure or other mechanism, including proposed depreciation rates for investments in non-distribution asset classes and how any revenue gains from the use of the pipelines by third parties will be used to offset eligible biogas supply infrastructure costs; and demonstrate that the plan is in the public interest with due consideration to the reduction in methane or carbon dioxide equivalent emissions and the addition of a supply source for the natural gas utility or a combination thereof. No project shall provide an annual volume of biogas that exceeds three percent of the natural gas utility’s annual firm sales demand, and no combination of projects shall provide an annual volume of biogas that exceeds 15 percent of the natural gas utility’s annual firm sales demand. The natural gas utility’s weather-normalized firm sales demand for the calendar year preceding the application shall be deemed to establish the annual firm sales demand for the purposes of calculating the volume and volumetric limits of projects. The Commission shall approve such a plan upon a finding that it (i) is in the public interest, (ii) will result in a decrease of methane or carbon dioxide equivalent emissions, and (iii) will result in rates that are just and reasonable, after notice and an opportunity for a hearing in accordance with the provisions of this chapter.
C. In addition to the items included in the plan as specified in subsection B, the plan may provide the natural gas utility with an option to receive the biogas or sell the biogas at market prices. A natural gas utility proposing this option as part of its plan shall propose how any revenue gains from the sale of the biogas will be used to reduce the cost of gas to its customers. The Commission shall approve or deny, within 180 days, a natural gas utility’s initial application for a biogas supply investment plan. A plan filed pursuant to this section shall not require the filing of rate case schedules. The Commission shall approve or deny, within 120 days, a natural gas utility’s application to amend a previously approved plan. If the Commission denies such a plan or amendment, it shall set forth with specificity the reasons for such denial, and the natural gas utility shall have the right to refile, without prejudice, an amended plan or amendment within 60 days, and the Commission shall thereafter have 60 days to approve or deny the amended plan or amendment. If the plan is filed as part of a general rate case using the cost of service methodology set forth in § 56-235.2 or a performance-based regulation plan authorized by § 56-235.6, then the Commission shall approve or deny the plan concurrent with or as part of the general rate case decision.
D. No other revenue requirement or ratemaking issues shall be examined in consideration of a plan filed pursuant to the provisions of this section.
E. A natural gas utility with an approved biogas supply investment plan shall annually file a report of the eligible biogas supply infrastructure investment made, the eligible biogas supply infrastructure costs incurred and the amount of such costs recovered, the volume of biogas delivered to customers or sold to third parties during the 12-month reporting period, and an analysis of the price of biogas delivered to the natural gas utility customers and the market cost of gas during the 12-month period. However, such analysis shall not affect a natural gas utility’s right to recover all eligible biogas supply infrastructure costs as set forth in subsection B. The report shall also identify the balance of over-recovery or under-recovery of the eligible biogas supply infrastructure costs at the end of the reporting period and the projected investment to be made, the projected infrastructure costs to be incurred, and the projected costs to be recovered during the next 12-month reporting period.
F. Costs recovered pursuant to this section shall be in addition to all other costs that the natural gas utility is permitted to recover and shall not be considered an offset to other Commission-approved costs of service or revenue requirements.