HB1943 SD2.DOC

SECTION 1. The legislature finds that a modern electrical grid is essential to meeting Hawaii's clean energy goals. In recent years, Hawaii's electric utilities have integrated significant levels of new renewable energy projects on each island grid, and distributed generation in the form of rooftop photovoltaic systems has been the fastest growing share of new renewable energy generation each year. To date, Hawaii's electric utilities are on track to exceed the next renewable portfolio standard goal in 2015. However, moving beyond the current levels of renewable energy on each grid will likely require further investment in advanced grid modernization technology to meet the State's aggressive clean energy goals and maintain a reliable electricity grid.

The legislature believes further investments in advanced grid modernization technology may be needed because Hawaii's island grids are reaching significant levels of variable renewable energy that can affect both the overall operation of the grid at the system level and the ability of utilities to provide safe and reliable service at the point of delivery to customers. Continued growth in renewable energy, particularly distributed generation, will require investment to modernize the grid to interconnect higher levels of distributed generation and to support other new customer energy options such as electric vehicles and demand response technologies.

The legislature also finds that the rapid growth of the State's solar energy industry has reduced Hawaii's dependence on imported oil, created thousands of jobs during a statewide economic downturn, and provided thousands of households and businesses new options to manage their energy bills. The legislature believes a long-term, sustainable solar energy industry is in the State's interest.

The legislature further finds that the solar energy industry is significantly impaired by the current interconnection process. As Hawaii transitions from the early stages of its clean energy transformation, the State needs a more transparent and timely process for electricity customers to exercise their options to manage their energy use.

The legislature additionally finds that, as distributed generation plays an increasingly significant role in the State's clean energy transition, the utility's processes for interconnection and distribution system planning must evolve along with new rules and tariffs for distributed generation. The current rules and tariffs for distributed generation were developed to support a nascent and emerging solar energy industry. Now that a significant portion of the State's electricity is produced by solar energy, tariffs for distributed generation need to be developed and adopted that compensate the utility for grid services provided to customers and that compensate customers for the grid services provided to the utility by distributed generation. These modified tariffs will also prepare for further technological innovation in this sector as advanced information, photovoltaic inverters, and energy storage systems expand the nature of services offered by customer-sited resources to the electric grid operator.

The legislature finds that the resolution of the matters noted in this measure require detailed discussion of technical, policy, and economic issues, and a process that will expedite decision-making on near-term, high priority issues. In recognition of the importance of these issues, the purpose of this Act is to:

(1) Establish guiding principles and outline a timely regulatory process to address modernization of the Hawaii electric system; and

(2) Dedicate sufficient resources to the public utilities commission and division of consumer advocacy of the department of commerce and consumer affairs to support a timely and expert review and resolution of the various identified issues related to grid modernization.

SECTION 2. Section 269-145.5, Hawaii Revised Statutes, is amended to read as follows:

"[[]§269-145.5[]] Advanced grid modernization technology; principles. (a) The commission, in carrying out its responsibilities under this chapter, shall consider the value of improving electrical generation, transmission, and distribution systems and infrastructure within the State through the use of advanced grid modernization technology in order to improve the overall reliability and operational efficiency of the Hawaii electric system.

(b) In advancing the public interest, the commission shall balance technical, economic, environmental, and cultural considerations associated with modernization of the electric grid in order to:

(1) Enable a diverse portfolio of renewable energy resources;

(2) Expand options for customers to manage their energy use;

(3) Maximize interconnection of distributed generation to the State's electric grids in a manner that:

(A) Is cost-effective, on nondiscriminatory terms, and at just and reasonable rates;

(B) Maintains the reliability of the State's electric grids; and

(C) Allows for access to the electric grid and establishment of rates through applicable rules, orders, and tariffs as reviewed and approved by the commission;

(4) Determine fair compensation for electric grid services provided to customers and for services provided to the electric grid by distributed generation customers and other non-utility service providers; and

(5) Maintain or enhance grid reliability and safety through modernization of the State's electric grids."

SECTION 3. (a) By July 1, 2014, the public utilities commission shall commence regulatory action to address the technical, policy, and economic issues associated with the modernization of the State's electric grids, based on the principles and priorities identified in section 269-145.5(b), Hawaii Revised Statutes; provided that the commission may commence additional regulatory actions to resolve issues associated with grid modernization at its discretion.

(b) Regulatory actions commenced by the public utilities commission pursuant to this section may include forming and facilitating working groups or opening proceedings in order to promote the efficient and timely resolution of issues. Any regulatory action shall encompass one or more procedural timelines, as determined by the public utilities commission, including an expedited timeline for resolving short-term, high priority issues associated with grid modernization.

(c) The public utilities commission shall submit a final report of its findings and recommendations, including any proposed legislation, to the legislature no later than twenty days prior to the convening of the regular session of 2016, and shall include an interim report of progress as part of its annual report submitted in January of 2015 pursuant to section 269-5, Hawaii Revised Statutes.

(d) The public utilities commission and the division of consumer advocacy of the department of commerce and consumer affairs shall be exempt from section 103D-304, Hawaii Revised Statutes, in the procurement of any professional services needed to conduct regulatory actions required pursuant to this section.

SECTION 4. There is appropriated out of the public utilities commission special fund under section 269-33, Hawaii Revised Statutes, the sum of $ or so much thereof as may be necessary for fiscal year 2014-2015 for the public utilities commission to conduct any regulatory actions required pursuant to section 3 of this Act; provided that the public utilities commission shall provide intervenor parties access to professional services procured by the commission to support this proceeding as deemed necessary and appropriate by the commission.

The sum appropriated shall be expended by the public utilities commission for the purposes of this Act.

SECTION 5. There is appropriated out of the public utilities commission special fund under section 269-33, Hawaii Revised Statutes, the sum of $ or so much thereof as may be necessary for fiscal year 2014-2015 for the division of consumer advocacy of the department of commerce and consumer affairs to represent the interests of consumers in accordance with section 269-51, Hawaii Revised Statutes, in the course of any regulatory actions required pursuant to section 3 of this Act.

The sum appropriated shall be expended by the division of consumer advocacy of the department of commerce and consumer affairs for the purposes of this Act.

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect on July 1, 2050; provided that sections 4 and 5 shall take effect on July 1, 2014.

HOUSE OF REPRESENTATIVES	H.B. NO.	1943
TWENTY-SEVENTH LEGISLATURE, 2014		H.D. 2
STATE OF HAWAII		S.D. 2