Report Title:

PART I

SECTION 1. Electricity in Hawaii is increasingly supplied by non-utility power generators that use a variety of both fossil fuel and renewable energy resources. Electric utilities acquire third-party supplied energy via power purchase agreements that establish a final price for energy supplied throughout the entire contract term, which typically lasts for twenty years. Negotiated prices in purchased power agreements are reviewed by the public utilities commission and the division of consumer advocacy of the department of commerce and consumer affairs, though the independent power producers' underlying cost data and associated assumptions are not typically disclosed to the commission and the division of consumer advocacy.

Complete access to underlying renewable energy project cost information, including cost support information and associated materials, would allow the commission and the division of consumer advocacy to better determine the reasonableness of proposed prices in the context of the local energy market, independently track trends in renewable energy project development, and more readily compare independent power producers' projects. More specific, detailed contract information can fundamentally shift the way renewable energy project costs are currently set so that they move more closely in line with the actual costs of energy production and are free of the influence of volatile fuel oil prices. In addition, more open and clear contract pricing information could potentially improve the financing environment for non-utility energy developers, thus benefiting the entire State through lower renewable energy project financing costs.

The purpose of this part is to authorize the public utilities commission and the division of consumer advocacy to examine all records, projections, business documents, and other necessary information relating to the review by the commission and the division of consumer advocacy of power purchase agreements for the sale of electricity to a public utility.

SECTION 2. Chapter 269, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§269- Power purchase agreements; records; confidential information. The public utilities commission and the division of consumer advocacy of the department of commerce and consumer affairs shall have the authority to examine all documents, ledgers, records, projections, contracts, or any other information and data pertaining to the development, financing, taxation, construction, or operations and maintenance of a project in any power purchase agreement that has been submitted to the commission and division of consumer advocacy for review or approval, as the commission and division of consumer advocacy deem necessary, including the information and data of any third-party electricity producer seeking to sell electricity to a public utility as defined within section 269-1; provided that this section shall be effective to the extent it is not inconsistent with applicable federal law. The commission and the division of consumer advocacy shall maintain the confidentiality of all information submitted under confidential seal and provided in accordance with this section."

PART II

SECTION 3. The legislature finds that electric public utilities provide an important and essential service to the State's citizens and businesses. As regulated utilities, electric companies have been granted a franchise by the State that results in the electric utilities having a monopoly over the provision of service to customers in their service territories. In return, the utilities have agreed to be regulated by the public utilities commission and must serve all customers that meet the terms and conditions of receiving electrical service. The utilities' franchise agreements grant their monopolies, and only the legislature may, at any time, alter, amend, or repeal these agreements.

The legislature further finds that Hawaii's ratepayers have persistently paid the highest electricity rates in the nation. This hinders the State's economic growth and imposes a severe financial challenge on many families. The electric utilities' heavy reliance on oil-derived fuels is a leading cause of the State's high electricity rates. As a result, the State has established aggressive clean energy goals to replace expensive imported fuels with lower cost clean energy sources that are indigenous to Hawaii. To support the integration of new technologies, the State has also recognized that this transition will require upgrades to utilities' grid infrastructure and to traditional operating practices, which will occur over the next several decades.

The legislature further finds that Hawaii's ratepayers are highly frustrated with sustained high rates of electricity, limited options to manage their utility bills, and a perceived lack of urgency by the utilities in addressing their needs. Under these conditions, in a competitive market, new companies would emerge to better serve their competitors' customers.

The legislature further finds that these conditions primarily apply to the State's investor-owned electric public utilities. The State's member-owned cooperative is accountable through periodic elections of its board of directors.

The legislature concludes that periodic performance review of franchise agreements held by the State's investor-owned electric public utilities is necessary to ensure that the public good is served and for an evolving electricity market.

Accordingly, the purpose of this part is to establish a legislative task force to review the State's franchises held by investor-owned electric public utilities.

SECTION 4. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

LEGISLATIVE UTILITY REVIEW TASK FORCE

§ -1 Legislative utility review task force, established. (a) There is established the legislative utility review task force. The task force shall review franchises held by investor-owned electric public utilities to ensure that these utilities are adequately providing services that serve the public.

(b) The task force shall be composed of the following members:

(1) The chair and vice chair of the standing committee of the senate whose subject matter relates to energy and environment, or their successor committee;

(2) The chair and vice chair of the standing committee of the house of representatives whose subject matter relates to energy and environmental protection, or their successor committee;

(3) The chair and vice chair of the standing committee of the senate whose subject matter relates to commerce and consumer protection, or their successor committee; and

(4) The chair and vice chair of the standing committee of the house of representatives whose subject matter relates to consumer protection and commerce, or their successor committee.

The chairs of the standing committees of both houses of the legislature whose subject matter relates to energy and the environment shall serve as the co-chairs of the task force.

(c) The focus of the review conducted by the task force shall be guided by a discussion framework and evaluation criteria to include, but not be limited to, the following topic areas:

(1) The future role of investor-owned electric public utilities in the State, including whether the function of these utilities should be limited to the provision of transmission and distribution services;

(2) The effectiveness of investor-owned electric public utilities in fulfilling their duties so as to serve the public interest, including the effectiveness of utility plans to reduce high electric rates and to serve the diverse needs of customers;

(3) The strategic plans and objectives of investor-owned electric public utilities to modernize the electric grid cost-effectively so as to serve the needs of all customers and to meet the State's energy goals; and

(4) The applicability and nature of the regulatory compact with respect to electric utilities in Hawaii in light of industry changes and other relevant findings, including those findings related to the topic areas described in paragraphs (1), (2), and (3).

(d) The task force shall meet publicly for input and recommendations regarding franchises held by investor-owned electric public utilities.

(e) Where appropriate, the task force shall seek input from the public utilities commission and the consumer advocate.

(f) For purposes of this chapter, the powers granted to the task force are limited to legislative review and recommendation, and shall not duplicate the powers and duties of the public utilities commission as established pursuant to chapter 269.

(g) For purposes of this section "task force" means the legislative utility review task force."

PART III

SECTION 5. New statutory material is underscored.

SECTION 6. This Act shall take effect on July 1, 2030.

THE SENATE	S.B. NO.	1043
TWENTY-SEVENTH LEGISLATURE, 2014		S.D. 1
STATE OF HAWAII		H.D. 1
		PROPOSED