STAND. COM. REP. NO. 790-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 1883
                                     H.D. 2




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Consumer Protection and Commerce, to which
was referred H.B. No. 1883, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO RENEWABLE ENERGY RESOURCES,"

begs leave to report as follows:

     The purpose of this bill is to reduce State dependence on
oil and increase development of renewable energy sources, to
thereby strengthen the economy in the long term by increasing the
stability of our energy costs, and returning moneys formerly paid
to oil producers, back to the State in the form of renewable
energy industry jobs.  Specifically, this bill establishes market
incentives for the generation of electricity from renewable
energy sources, and a market-based renewable energy credit
trading mechanism to minimize the cost of implementing renewable
energy goals.

     This measure applies to "qualified electric utility
companies" (QEUCs), identified by the amount of kilowatt-hours of
electricity sold per year, and who represent the largest electric
utilities in the State.  The measure creates a demand for
renewable energy generation, broadly defined to include energy
sources such as wind, solar, organic waste, and geothermal.

     Demand is created by imposing the requirement that a
specified percentage of energy sold by the QEUC must come from
renewable energy sources.  These requirements, or "renewable
portfolio standards" (RP standards) are applicable as follows:


 
 
                                 STAND. COM. REP. NO. 790-00
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     (1)  7.5 percent as of January 1, 2002, to increase by 0.35
          percentage points each succeeding year up to January 1,
          2010;

     (2)  10 percent as of January 1, 2010; and

     (3)  20 percent as of January 1, 2020.

In addition, the following percentages of the gross utility peak
power production of a QEUC must be derived from solar
photovoltaic electric energy sources as follows:

     (1)  One quarter of 1 percent January 1, 2010;

     (2)  One half of 1 percent by January 1, 2015; and

     (3)  1 percent by January 1, 2020.

Progress toward these percentages may be counted toward the RP
standard.

     Under the bill, QEUC compliance is measured by "renewable
energy credits," with one credit equal to one kilowatt-hour of
electricity from a renewable energy source.  Thus, to attain the
RP standards above, a QEUC must obtain credits equal to the
required percentage of the total kilowatt-hours of energy sold by
the QEUC during the applicable time period.

     QEUCs may either generate the credit themselves or purchase
it from another company, allowing energy generated at the least
cost to be demanded and purchased, and providing a market
incentive for the development of efficiently produced renewable
energy.

     The bill includes the following incentives for QEUC
compliance and the development of renewable energy sources:

     (1)  Monitoring and enforcement, including the imposition of
          penalties, by the Public Utilities Commission;

     (2)  Bonus credits for the development of certain levels of
          solar electric energy production, and for the
          construction of a photovoltaic assembly or production
          plant in the State.

     Testimony in support of this measure was received from Maui
County Council, Sierra Club, Hawai'i Chapter, Sierra Club Kauai
Group of the Hawaii Chapter, Kauai Renewable Energy Hui,
Renewable Energy Services, Inc., Union of Concerned Scientists,

 
                                 STAND. COM. REP. NO. 790-00
                                 Page 3

 
Pacific Region PowerLight Corporation, Life of the Land, Virtus
Energy Research Associates, Inc., Duke Solar Energy, LLC, Puna
Geothermal Venture Hawaii and several private individuals.

     The Division of Consumer Advocacy, Department of Business,
Economic Development, and Tourism, and Hawaii Renewable Energy
Alliance supported the intent of this bill.  Comments were
submitted by an individual serving as Principal Policy Advisor at
the National Renewable Energy Laboratory, and by Kauai Electric.
Testimony in opposition was received from Hawaiian Electric
Company, Inc, Maui Electric Company, and Hawaii Electric Company.

     Your Committee agrees with objectives of this measure and
finds that the market mechanism in the bill is an innovative and
attractive one.  However, your Committee has serious concerns
regarding the short-term cost impact of this measure on
consumers.  Testimony indicates that renewables have higher
initial capital equipment costs than traditional energy sources.
In addition, the technology of renewable energy is still in its
formative stages and in many cases cannot compete against
traditional energy sources in terms of cost.  Other testimony
reveals that the renewable energy experience of other states may
not be generalizable to this State, because of its unique
circumstances.  These include its isolation and inability to
obtain energy from the power grids of neighboring states, the
scarcity of available lands, and political constraints on
development of existing renewable energy opportunities, such as
geothermal.

     In brief, your Committee believes that cost of implementing
this measure in this state is difficult to determine and
uncertain.  Your Committee thus finds that the standards in this
measure need scrutiny, and that thought must be given to
developing standards that minimize the negative short-term impact
of this bill on the consumers and economy of this State.

     Additionally, your Committee believes that a critically
important element of this measure is the delivery of "firm"
power, power that can be constantly available at pre-designated
levels and that is necessary to supplement less reliable flows of
energy from renewable sources such as wind or photovoltaic.  In
the continuing discussion of this vital subject, the potential
for using the solid waste stream, as is currently used by the
City and County of Honolulu's H power plant, must not be ignored.
Use of the State's solid waste stream as a source of firm power
would solve a multiplicity of problems for this State, and your
Committee requests that consideration be given to a more specific
integration of this renewable source as a source of firm power in
the bill.

 
                                 STAND. COM. REP. NO. 790-00
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     Accordingly, your Committee has amended this bill by
removing the RP and photovoltaic standard percentages, and
replacing them with blanks, to ensure further discussion.  For
the same reason, your Committee has also replaced the effective
date of this measure with a blank.

     Technical, nonsubstantive amendments have also been made for
purposes of clarity, consistency, and style.

     As affirmed by the record of votes of the members of your
Committee on Consumer Protection and Commerce that is attached to
this report, your Committee is in accord with the intent and
purpose of H.B. No. 1883, H.D. 1, as amended herein, and
recommends that it pass Third Reading in the form attached hereto
as H.B. No. 1883, H.D. 2.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Consumer
                                   Protection and Commerce,



                                   ______________________________
                                   RON MENOR, Chair