Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committee on Water, Land, Energy and Environment, to which was referred S.B. No. 2278 entitled:

begs leave to report as follows:

The purpose of this measure is to accelerate depreciation of combined heat and power systems for tax purposes.

Testimony in support of this measure was received from the Department of Business, Economic Development, and Tourism, The Gas Company, Life of the Land, and one individual. The Department of Taxation testified in opposition. The Tax Foundation of Hawaii submitted comments.

Your Committee finds that combined heat and power systems are generally much more fuel-efficient than the electric utility system in meeting energy needs. This is primarily because these systems not only produce electricity on site, avoiding transmission losses, but also harness thermal energy from their exhaust for a variety of functions, including water heating, process heat, drying, space heating, or air conditioning.

Your Committee finds that increased use of combined heat and power systems supports the State's energy objectives and that this measure provides a means to encourage increased commercial deployment of combined heat and power systems. Your Committee has amended this measure to make technical, nonsubstantive amendments in conformance with the preferred drafting style.

As affirmed by the record of votes of the members of your Committee on Water, Land, Energy and Environment that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2278, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2278, S.D. 1, and be referred to the Committee on Ways and Means.