STAND

STAND. COM. REP. NO. 857-04

Honolulu, Hawaii

, 2004

RE: S.B. No. 2474

S.D. 3

H.D. 1

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Energy and Environmental Protection, to which was referred S.B. No. 2474, S.D. 3, entitled:

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

begs leave to report as follows:

The purpose of this bill is to require:

(1) Electric utilities to establish renewable portfolio standards of 20 percent by December 31, 2015, and 30 percent by December 31, 2020; and

(2) The Public Utility Commission (PUC) to study the feasibility of implementing a rate structure and an incentives program to encourage the use of renewable energy.

Smith Development, Hawaii Solar Energy Association, and Life of the Land supported this bill. Powerlight, Hawaii Renewable Energy Alliance, and Sierra Club, Hawaii Chapter, supported this measure with amendments. The PUC and Hawaii Business Roundtable supported the intent of this bill. The Department of Business, Economic Development, and Tourism (DBEDT), Division of Consumer Advocacy, and Hawaiian Electric Company (HECO) supported the intent of this measure and suggested amendments. The Chamber of Commerce of Hawaii opposed this bill.

Your Committee has carefully considered the testimonies of all parties in an attempt to balance the objections and concerns of HECO and the Chamber of Commerce of Hawaii, along with the need to take bold action to chart a progressive energy strategy for the State. This strategy will guarantee the integration of Hawaii’s indigenous renewable energy resources in electricity production to promote economic stability, enhance energy security, and demonstrate environmental stewardship.

The concerns raised by the utility over a mandatory renewable portfolio standard (RPS) can generally be grouped into two categories. First, discomfort has been expressed over the uncertainty of the availability of economically viable and technically sound economic renewable energy resources beyond 2010, and, second, that enforcing such mandates by penalties puts the utility at financial risk.

Your Committee has addressed these concerns and has amended this bill by:

(1) Adopting a suggestion offered by HECO that any standard beyond 2010 be based on sound science, by requiring the PUC to contract an independent, peer-reviewed assessment that can be used to adjust and establish the RPS beyond 2010. Furthermore, this measure establishes a 20 percent RPS goal for 2020, with results from the independent review process to be used to evaluate the goal as a future standard;

(2) Authorizing the PUC to use "off-ramps" to deviate from the RPS in the event of circumstances beyond the control of the utility that could not have been reasonably anticipated or ameliorated, to address concerns expressed by HECO, where they do not want to be penalized for good faith efforts that result in falling short of the RPS in any given year. The intent of this language also gives discretion to the PUC to disallow any proposed projects that are determined to have untenable impacts on utility rates;

(3) Adding additional language in the bill authorizing the PUC to develop a performance-based rate structure that addresses a concern regarding the profitably of the utility, but more significantly, retains language authorizing incentives as a means to stimulate utility acquisition of renewable energy resources. Your Committee believes that the authorization of incentives is a first among renewable energy portfolio legislation for states with RPS laws, and is evidence of a strong legislative commitment to send the proper market signals to both the electric utility and the affected public.

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

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 S.B. No. 2474, S.D. 3, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2474, S.D. 3, H.D. 1, and be referred to the Committee on Consumer Protection and Commerce.

Respectfully submitted on behalf of the members of the Committee on Energy and Environmental Protection,

		____________________________ HERMINA M. MORITA, Chair