SB390 HD1.DOC

SECTION 1. The intent of the legislature is that the variances provided for in Act 204, Session Laws of Hawaii 2008, (Act 204) will be rarely, if ever, exercised or granted because the burden of proof will lie with the applicant to demonstrate that a solar water heater system, regardless of location or circumstance, is not cost effective in the context of a thirty-year mortgage term. This requires the use of realistic assumptions regarding interest rates, discount rates, inflation rates, and the expected average cost of electricity by island over the thirty-year period, regardless of the cost of electricity, or of oil or other fossil fuels, at a specific point in time.

The legislature finds that it is necessary to clarify the intent of the variance provision that allows for a demand water heater device. There is the potential that this provision may be used to allow a developer/builder, the purchaser of a water heating device, of a single-family dwelling, to circumvent the policy objectives of Act 204.

In its deliberation of Act 204, the legislature found that the installation of a solar water heater system will only occur if the developer/builder was able to recover the cost of the investment from the consumer, who ultimately enjoys the energy savings. Therefore, a solar water heater mandate was necessary to ensure that an energy savings could be realized by the consumer, without which the housing market would be sensitive to certain price points that do not factor in the cost-effectiveness of energy efficiency devices that reduce the overall energy cost of a home to benefit the consumer.

The legislature further found that retrofitting a home for a solar water heater after it was constructed was more costly, and that such upfront costs, despite incentives such as state and federal tax credits and utility rebates, were substantial barriers for the average consumer. The financial barriers can be addressed, however, by including the installation of a solar water heater into the purchase price and mortgage of a home, where the cost of the system may pay for itself immediately.

Therefore, the legislature intended for a consumer to have the option to use gas appliances with the full knowledge that such a system may be more costly and less efficient. To obviate any attempt to circumvent Act 204, then, the legislature intends that if the potential variance applicant is not the party who will ultimately pay for the energy cost consumption, then only items (1), (2), or (3) of subsection (a) in section 196-6.5, Hawaii Revised Statutes, should apply.

Additionally, the legislature finds that the continuation of the renewable energy income tax credit needs to remain available for all homes built before January 1, 2010.

The purpose of this Act, therefore, is to clarify the provisions of Act 204, to carry out the legislature's intent.

SECTION 2. Section 196-6.5, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:

"(a) On or after January 1, 2010, no building permit shall be issued for a new single-family dwelling that does not include a solar water heater system that meets the standards established pursuant to section 269-44, unless the energy resources coordinator approves a variance. A variance application shall only be [~~approved~~] accepted if submitted by an architect or mechanical engineer licensed under chapter 464, who attests that:

(1) Installation is impracticable due to poor solar resource;

(2) Installation is cost-prohibitive based upon a life cycle cost-benefit analysis that incorporates the average residential utility bill and the cost of the new solar water heater system with a life cycle that does not exceed fifteen years;

(3) A [~~substitute~~] renewable energy technology system, as defined in section 235-12.5, is [~~used~~] substituted for use as the primary energy source for heating water; or

(4) A demand water heater device approved by Underwriters Laboratories, Inc., is installed; provided that at least one other gas appliance is installed in the dwelling. For the purposes of this paragraph, "demand water heater" means a gas-tankless instantaneous water heater that provides hot water only as it is needed.

(b) A request for a variance shall be submitted to the energy resources coordinator on an application prescribed by the energy resources coordinator and shall include[,] but not be limited to[,] a description of the location of the property and justification for the approval of a variance using the criteria established in subsection (a). A variance shall be deemed approved if not denied within thirty working days after receipt of the variance application. The energy resources coordinator shall publicize:

(1) All applications for a variance within seven days after receipt of the variance application; and

(2) The disposition of all applications for a variance within seven days of the determination of the variance application."

SECTION 3. 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 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 in the [~~State~~] state by a taxpayer during the taxable year. This credit shall be available for systems installed and placed in service in the [~~State~~] state after June 30, 2003. The tax credit may be claimed as follows:

(1) Solar thermal energy systems for:

(A) Single-family residential property for which a building permit for a single-family dwelling was issued prior to January 1, 2010: thirty-five per cent of the actual cost or $2,250, whichever is less;

(B) Multi-family residential property: thirty-five per cent of the actual cost or $350 per unit, whichever is less; and

(2) Wind-powered energy systems for:

(A) Single-family residential property: twenty per cent of the actual cost or $1,500, whichever is less[;], unless all or a portion of the system is used to fulfill the substitute renewable energy technology requirement pursuant to section 196-6.5(a)(3), then the credit shall be reduced by twenty per cent of the actual system cost or $1,500, whichever is less;

(B) Multi-family residential property: twenty per cent of the actual cost or $200 per unit, whichever is less; and

(3) Photovoltaic energy systems for:

(A) Single-family residential property: thirty-five per cent of the actual cost or $5,000, whichever is less[;], unless all or a portion of the system is used to fulfill the substitute renewable energy technology requirement pursuant to section 196-6.5(a)(3), then the credit shall be reduced by thirty-five per cent of the actual system cost or $2,250, whichever is less;

(B) Multi-family residential property: thirty-five per cent of the actual cost or $350 per unit, whichever is less; and

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 in the [~~State~~] state 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 4. Section 269-44, Hawaii Revised Statutes, is amended to read as follows:

"[[]§269-44[]] Solar water heater system standards. Not later than [~~July 1, 2009,~~] , or as soon as reasonably practicable, the public utilities commission shall adopt [~~or establish by rule, tariff, or order,~~] standards for solar water heater systems [to include, but not be limited to, specifications for the performance, materials, components, durability, longevity, proper sizing, installation, and quality to promote the objectives of section 269-124.]; provided that the public utilities commission may contract with the public benefits fee administrator for the development of standards that may be adopted by the public utilities commission."

SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 6. This Act shall take effect on January 1, 2050, and shall be retroactive to July 1, 2009.

THE SENATE	S.B. NO.	390
TWENTY-FIFTH LEGISLATURE, 2009		S.D. 2
STATE OF HAWAII		H.D. 1