Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Energy and Environmental Protection, to which was referred H.B. No. 1139 entitled:

begs leave to report as follows:

The purpose of this bill is to support the development of alternative energy sources by extending the energy conservation income tax credit (tax credit) for four more years.

The Department of Taxation (DOTAX), Department of Business, Economic Development, and Tourism, Inter-Island Solar Supply, Plumbing & Mechanical Contractors Association of Hawaii, Hawaii Solar Energy Association, Department of Research and Development for the County of Hawaii, and PowerLight Corporation supported this bill.

Hawaii Renewable Energy Alliance, Hawaiian Electric Company, Hawaii Electric Light Company, Maui Electric Company, and the Sierra Club, Hawaii Chapter, supported the intent of this bill. The Gas Company, Tax Foundation of Hawaii, and R&R Services commented on this bill.

The tax credit is to sunset on June 30, 2003. This bill extends the tax credit until July 1, 2007. The tax credit has been successful in encouraging owners of residential and commercial buildings to install and use renewable energy systems. Currently, this tax credit applies to solar or wind energy devices, heat pumps, and ice storage systems.

Your Committee finds that there are other emerging energy efficient technologies, such as combined heat and power (CHP) systems, that will reduce Hawaii's consumption of fossil fuels. CHP systems are extremely efficient because they simultaneously produce electricity and thermal energy that is used to make steam and hot water, with a single energy conversion device.

CHP systems include fuel cells, solar thermal collectors, micro turbines, small combustion turbines, and internal combustion engines.

However, your Committee has found overwhelming support for this measure from within the Administration, in particular with DOTAX. This bill provides incentives, not only for renewable technologies, but also for energy efficiency, energy conservation and utility load management.

Your Committee has found that energy efficiency, energy conservation, and utility load management can usually be promoted through pricing signals and operational cost savings. If the proponents of this measure continue to advocate that tax credits should be applied to these types of technologies and that the loss of revenue to the state's treasury is insignificant, then this Committee urges strong consideration of this measure rather than the language provided for in Part V of H.B. No. 288, H.D. 1.

Your Committee has amended this bill by:

As affirmed by the record of votes of the members of your Committee on Energy and Environmental Protection that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1139, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1139, H.D. 1, and be referred to the Committee on Finance.