A. The commission shall adopt rules to allow public utilities a reasonable opportunity to recover costs incurred by a public utility for the development and ongoing construction of a clean energy project. Such costs must not exceed the level authorized by the commission in a proceeding to establish a reasonable level of expenditure that the public utility may undertake to develop and construct a clean energy project. The public utility shall recover approved costs reasonably incurred up to the time it files a general rate case whether or not the project is in service. This section does not relieve a public utility of its duty to act reasonably and prudently as circumstances indicate once development and construction of a clean energy project begins.

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B. A public utility that incurs costs to reduce harmful air emissions at new or existing power plants may seek recovery of those costs in a general rate case, regardless of whether the technology or method used qualifies as a clean energy project or advanced coal technology. If a public utility seeks cost recovery for expenditures to reduce harmful air emissions beyond levels required by law or rule, the commission may find that such expenditures are reasonable.

C. The commission, upon petition or its own motion, shall open a docket to consider appropriate performance-based financial or other incentives to encourage public utilities to develop and construct clean energy projects.

D. As used in this section:

(1)     “advanced coal technology” means new coal-based generation, coal gasification or other technology using coal as a fuel source that is certified by the department of environment to meet the following specifications:

(a) emits the lesser of: 1) what is achievable with the best available control technology; or 2) thirty-five thousandths pound per million British thermal units of sulfur dioxide, twenty-five thousandths pound per million British thermal units of oxides of nitrogen and one hundredth pound per million British thermal units of total particulates in the flue gas;

(b) removes the greater of: 1) what is achievable with the best available control technology; or 2) ninety percent or more of the mercury from the input fuel;

(c) captures and sequesters or controls carbon dioxide emissions such that by the later of January 1, 2017, or eighteen months after the commercial operation date, no more than one thousand one hundred pounds per megawatt-hour of carbon dioxide is emitted into the atmosphere;

(d) all infrastructure required for sequestration is in place by the later of January 1, 2017, or eighteen months after the commercial operation date of the qualified generating facility;

(e) includes methods and procedures to monitor the disposition of the carbon dioxide captured and sequestered from the facility; and

(f) does not exceed seven hundred net megawatts nameplate capacity;

(2)     “clean energy project” means the construction or modification of a new or existing electric generation facility in a manner that employs a technology that has additional financial risk because it is not commercially established or because it employs an established technology that is not commercially proven under the altitude, geographic or resource availability conditions under which it is proposed to operate and may include associated renewable energy storage facilities, recycled energy and, for

the limited purposes of this section, advanced coal technology, or other technology as deemed appropriate by the commission; a “clean energy project” shall achieve emission levels no greater than those specified for advanced coal technology and shall not include nuclear power;

(3)     “development” means the study, plan, design, site, permit, engineering, assessment and determination of the economic and operational feasibility at one or more locations and may include small-scale demonstration projects, if approved by the commission, as a reasonable expenditure;

(4)     “recycled energy” means energy produced by a generation unit with a name-plate capacity of not more than fifteen megawatts that converts the otherwise lost energy from exhaust stacks or pipes to electricity without combustion of additional fossil fuel; and

(5)     “sequester” means to store, or chemically convert, carbon dioxide in a manner that prevents its release into the atmosphere and may include the use of geologic formations and enhanced oil, coalbed methane or natural gas recovery techniques.

E The department of environment may issue rules governing the procedure for administering the certification provisions of this section.