HB2081.DOC

SECTION 1. The legislature finds that the current public utility regulatory structure for electricity and fuel resource procurement practices may hinder the development of essential public purpose projects that require utility cooperation and procurement of electricity or fuel. Currently, a public utility is not obligated or incentivized to look beyond its own interests, direct costs to its ratepayers, and regulatory requirements in the procurement of electricity or fuel. As a result, public purpose projects may be stalled unnecessarily, and the public, including the public utilities' ratepayers, may also be negatively impacted.

The legislature believes that a simplified regulatory process would allow the State and counties to develop and present public purpose projects that involve a public utility's participation in the procurement of electricity or fuel without the prior approval of the affected public utility. A simplified regulatory process would encourage and facilitate the development of projects with important public purpose objectives. The role of the public utility in these cases would be limited to system integration. Public purpose projects may include management of waste and waste water, potable water, law enforcement, public health, and other essential public services.

The legislature notes that in some circumstances, direct and indirect public benefits may warrant higher rates for electricity or fuel in relation to utility procurement contracts.

The purpose of this Act is to create a simplified regulatory process and procurement mechanism for the public utility commission's review and approval of projects and to direct public utilities to procure electricity or fuel from those projects at a rate authorized by the commission.

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

"Part . PUBLIC PURPOSE PROJECTS

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

"Agency" means each state or county board, commission, department, or officer authorized by law to make rules or to adjudicate contested cases, except those in the legislative or judicial branches.

"Commission" means the public utilities commission.

"Public purpose project" means a project that is in the public interest as determined by an agency.

§269-B Public purpose project determination by agency. An agency shall comply with the following process in determining whether a proposed public purpose project is in the public interest:

(1) The agency shall confer with the public utility that is the intended buyer of the electricity or fuel to be produced by the public purpose project and shall provide the public utility with written notice that the agency intends to propose a public purpose project. The public utility, within ninety days of notice from the agency, shall prepare and provide the agency with a feasibility report describing and analyzing the feasibility of the proposed public purpose project in interconnecting and providing electrical energy, or in supplying fuel to the public utility for electricity generation. The feasibility report shall be prepared at the cost of the public utility; provided that the commission shall allow the public utility to recover reasonable costs in preparing the feasibility studies from its ratepayers pursuant to a methodology approved by the commission. If the agency disagrees with the public utility, the agency may appoint an independent engineer or consultant at its own cost to validate or contest the public utility's findings;

(2) The agency shall formulate a proposal for a public purpose project. The proposal shall include, at a minimum, the following:

(A) The location of the facility;

(B) A brief description of the facility, including a statement and agency determination that the plan is for a public purpose project as defined in this part;

(D) The power production capacity of the facility;

(E) The public benefit created by the project;

(F) The proposed rates for the public purpose project; and

(G) The feasibility of the proposed public purpose project in interconnecting and providing renewable electricity or in supplying renewable fuel to the public utility; and

(3) The agency shall determine whether the planned public purpose project is in the public interest pursuant to its authority under all governing and applicable laws. The determination shall be supported by written findings of the agency.

§269-C Petition for commission review of public purpose project. The agency shall submit a petition for approval and implementation of the public purpose project to the commission. The agency shall serve the affected public utility with the petition. The commission shall:

(1) Within sixty days of the petition's submission to the commission, determine the completeness of the petition; otherwise the petition shall be deemed to be complete sixty days after filing. If the commission determines a petition to be complete, the commission shall provide the agency with written notice of the findings and the reasons therefor, and if incomplete, shall provide the agency with an opportunity to amend the petition and resubmit the petition for approval. The petition shall include, at a minimum, the proposal, feasibility report, and written findings described in section 269-B;

(2) Upon a finding that the petition is complete, the agency and the public utility shall negotiate in good faith the material terms and necessary details of the agreement for the purchase of renewable energy generated or produced by the public purpose project. If the agency and the public utility reach agreement within forty-five days on all the material terms of the public purpose project, the parties, within thirty days of reaching an agreement, shall file a joint petition for the commission's approval of the public purpose project. If the parties do not reach an agreement within forty-five days, each party, within the next fourteen days thereafter, shall report the status of negotiations with the commission noting their differences and all outstanding issues for final adjudication by the commission;

(3) The commission shall determine whether the proposed public purpose project is in the public interest;

(4) The commission shall address any joint petition for approval of the public purpose project as provided in this part, and determine any terms not agreed upon by the agency and the public utility as may be required and appropriate, and may direct the public utility to accept the public purpose project on terms and conditions as may be deemed appropriate and reasonable by the commission; and

(5) The commission shall approve or deny the petition, and make any other required determinations within one hundred eighty days of the filing of the petition. The commission shall conduct a contested case in making a determination and a determination shall be appealable as provided in section 269-15.5.

§269-D Public purpose project implementation. Following approval of the public purpose project, the agency and public utility shall implement the project as provided in this part. The implementation of the project shall consist of, and be subject to, the following:

(1) A public purpose project duly approved by the commission shall be entitled to receive rates from the public utility as approved by the commission;

(2) The public utility may reasonably determine the location where the electricity or fuel is to be delivered to the public utility; provided that any additional costs to deliver the renewable electrical energy or fuel shall be taken into consideration in the decision making process by the commission;

(3) The commission may require an independent engineer to validate the cost of the resource and system integration; and

(4) The public utility shall bear the cost of any alteration or modification of its equipment or facilities that may be required to accept electrical energy or fuel under this section; provided that the commission shall allow the public utility to recover the costs incurred pursuant to applicable ratemaking procedures and principles as determined by the commission.

§269-E Limitations of part. Nothing in this part shall prohibit an agency from directly approaching a public utility to discuss or negotiate an agreement for the purchase and sale of renewable electrical energy or renewable fuel from a public purpose project.

§269-F Role of consumer advocate. The consumer advocate, in addition to other considerations within its authority and responsibilities, shall consider the benefits of the public purpose project, as determined by an agency in this part."

SECTION 3. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:

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HOUSE OF REPRESENTATIVES	H.B. NO.	2081
TWENTY-EIGHTH LEGISLATURE, 2016
STATE OF HAWAII