Increases renewable energy tax credit for photovoltaic systems and removes the credits' 2008 sunset date; authorizes bond issuances to install photovoltaic systems at public schools statewide and enable state facilities to meet greenhouse gas and energy consumption reduction goals; requires incorporation of leadership in energy in environmental design silver standards for certain state-funded facilities; establishes the pay as you save pilot project to help finance residential solar hot water systems.

A BILL FOR AN ACT

SECTION 1. The legislature finds that Hawaii's dependence on petroleum for about ninety per cent of its energy needs is more than any other state in the nation. This makes the State extremely vulnerable to any oil embargo, supply disruption, international market dysfunction, and many other factors beyond the control of the State. Furthermore, the continued consumption of conventional petroleum fuel negatively impacts the environment.

The legislature also finds that increased energy efficiency and use of renewable energy resources would increase Hawaii's energy self-sufficiency, achieving broad societal benefits, including increased energy security, resistance to increases in oil prices, environmental sustainability, economic development, and job creation.

Over the years, the legislature has worked steadily to encourage the deployment of renewable energy resources and energy efficiency initiatives. This includes but is not limited to: establishing a net energy metering program, interconnection standards, and renewable energy tax credits; establishing greenhouse gas and energy consumption reduction goals for state facilities and requiring the use of energy efficient products in state facilities; and providing incentives for the deployment of solar energy devices. The legislature also established an enforceable renewable energy portfolio standard, under which twenty per cent of Hawaii's electricity is to be generated from renewable resources by the end of 2020.

To shape Hawaii's energy future and achieve the goal of energy self-sufficiency for the State of Hawaii, our efforts must continue on all fronts, integrating new and evolving technologies and providing incentives and assistance to address barriers. The purpose of this Act is to provide a comprehensive approach to achieving energy self-sufficiency for the State by:

This Act shall be called the Energy Self-Sufficiency Act of 2006.

SECTION 2. Section 235-12.5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) When the requirements of subsection (c) are met, each individual or corporate resident taxpayer that files an individual or corporate net income tax return for a taxable year may claim a tax credit under this section against the Hawaii state individual or corporate net income tax. The tax credit may be claimed for every eligible renewable energy technology system that is installed and placed in service by a taxpayer during the taxable year. This credit shall be available for systems installed and placed in service after June 30, 2003. The tax credit may be claimed as follows:

provided that multiple owners of a single system shall be entitled to a single tax credit; and provided further that the tax credit shall be apportioned between the owners in proportion to their contribution to the cost of the system.

In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for every eligible renewable energy technology system that is installed and placed in service by the entity. The cost upon which the tax credit is computed shall be determined at the entity level. Distribution and share of credit shall be determined pursuant to section 235-110.7(a)."

SECTION 3. Act 207, Session Laws of Hawaii 2003, is amended by amending section 4 to read as follows:

"SECTION 4. This Act shall take effect on July 1, 2003[, and shall be repealed January 1, 2008]."

SECTION 4. The director of finance is authorized to issue general obligation bonds in the sum of $5,000,000, or so much thereof as may be necessary, and the same sum, or so much thereof as may be necessary, is appropriated for fiscal year 2006-2007 for the purpose of developing and implementing a photovoltaic pilot project for one public school on each of the islands of Oahu, Maui, Hawaii, and Kauai. The project sites shall be determined by the department of education as most suitable to achieving the pilot project's objectives. The project objectives shall focus on the: installation of photovoltaic systems in conjunction with substantial roof repairs to a building; application of net metering to offset costs of the system; and recapture of system costs within three quarters of the useful life on the photovoltaic system. The sums appropriated shall be expended by the department of education.

SECTION 5. Chapter 196, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§196-   Leadership in Energy and Environmental Design silver standards for newly constructed or substantially renovated facilities. All design that is initiated on or after January 1, 2006, for construction of a building or substantial renovation of a building, utilizing fifty per cent or more in state funds, shall incorporate Leadership in Energy and Environmental Design silver standards developed by the United States Green Building Council."

SECTION 6. The director of finance is authorized to issue general obligation bonds in the sum of $100,000,000, or so much thereof as may be necessary, and the same sum, or so much thereof as may be necessary, is appropriated for fiscal year 2006-2007 for the purpose of making improvements to state facilities to bring them into compliance with the purposes of Act 77, Session Laws of 2002; provided that priority for the energy conservation projects in existing public buildings shall be based on those buildings that result in immediate payback in cost savings and conservation. The sum appropriated shall be expended by the department of accounting and general services for the purposes of this Act.

SECTION 7. The appropriations made for the capital improvement projects authorized by this Act shall not lapse at the end of the fiscal biennium for which the appropriation is made; provided that all moneys from the appropriation unencumbered as of June 30, 2008, shall lapse as of that date.

SECTION 8. Chapter 269, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"PART . ENERGY EFFICIENCY MARKET-BASED INITIATIVE

§269-   Definitions. For the purposes of this part:

"Certification process" means a process approved by the commission whereby a public utility approves the pay as you save financing method for the renewable energy technology measure to be installed in the dwelling unit as being cost effective and efficient.

"Commission" means the public utilities commission.

"Cost-effective renewable energy technology measures" means renewable energy technology measures with sufficient estimated electricity or gas savings, determined by rates in effect at the time of purchase, and other quantifiable non-energy savings that are sufficient to cover all costs (e.g., financing charges and any program fees) by payments of no more than three-quarters of the estimated savings within a period no greater than three-quarters of the estimated useful life of the measure.

"Pay as you save model system" means the market-based system based on the "Pay As You Save" model:

(2) That contains the following three essential elements:

"Pay as you save model system fee" means the fee that is established by the public utility to defray costs of the program, subject to approval by the commission.

"Permanent measures" means renewable energy technology measures that are likely to remain in the premises where installed, notwithstanding the subsequent departure by occupants of the premises.

"Portable measures" means renewable energy technology measures that are susceptible of being removed by occupants upon their departure from the premises where these measures were installed.

"Renewable energy" means energy produced by solar, energy conserved by passive solar design, or daylighting.

"Renewable energy technology" means technology that uses renewable energy to provide hot water to a dwelling unit.

"Residential consumer" means a residential tenant or property owner who resides in the dwelling unit in which the cost-effective renewable energy technology measure is installed and operated.

§269-   Pay as you save model system for residential consumers; established. No later than March 1, 2007, the commission shall adopt rules and procedures in accordance with chapter 91 to monitor a public utility's pay as you save model system program for residential consumers of electricity and gas utilities as required under this part.

§269-   Gas and electric utilities; pay as you save model system; established. (a) No later than July 1, 2007, each Hawaii gas and electric utility shall:

(b) The public utility may adopt the pay as you save model as modified by this part or any program that meets the objectives of this part.

(c) Payments made by utilities to administer the program required under this part may be offset by charges to residential consumers of renewable energy technology measures using the pay as you save model system; provided that for each residential consumer, this charge and all other program charges, except for interest costs, shall not exceed:

§269-   Certification of renewable energy technology measures. Only renewable energy technology measures certified as being cost effective and appropriate may be purchased using the pay as you save model fee. The utility may extend the term of a pay as you save model fee to the original or successor residential consumers at a location where renewable energy technology measures have been installed until all costs for these measures have been recovered, including costs due to repairs and missed payments.

§269-   Participation in the pay as you save program; consumer contract simplification. In the interest of reducing transaction costs and simplifying the pay as you save model system for residential consumers, if requested by a residential consumer, an electric utility shall include gas saving measures under its fee, or the gas utility shall include electricity saving measures under its fee, so residential consumers who purchase renewable energy technology products under this program shall only have to sign one contract and pay a single pay as you save model system fee charge."

SECTION 9. The commission shall ensure that all reasonable costs incurred by gas or electric utilities to start up and implement the pay as you save model system are recovered as part of the utility's revenue requirement, including but not limited to necessary billing system adjustments and any costs for pay as you save model system efficiency measures that are not recovered via participating residential consumers' pay as you save model system bill payments or otherwise.

SECTION 10. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

SECTION 11. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 12. This Act shall take effect on July 1, 2006; provided that section 2 of this Act shall apply to taxable years beginning after December 31, 2005; and provided further that the increased tax credits established in section 2 of this Act shall

be available only to eligible renewable energy technology systems installed after July 1, 2006.