SB445

SECTION 1. The legislature finds that in 2024, numerous unscheduled electric outages were caused by aging transmission and distribution lines, aging fossil fuel generation facilities, and, in certain circumstances, the insufficient generation of weather-dependent renewable resources. These unanticipated outages had significant impacts on the economic security and physical safety of the State's residents and businesses.

The legislature also finds that in 2024, the State's largest investor-owned utility was forecasted to achieve a consolidated thirty-six per cent renewable portfolio standard. A significant portion of the utility's renewables consist of renewable electrical energy, including rooftop solar, and renewable energy sources, including new facilities and the conversion of existing facilities. As more of these cleaner and more affordable resources are added to the grid, the logical and reasonable expectation is that a commensurate amount of the costs related to fossil fuel resources will be removed from the rate base.

However, the legislature recognizes that, in practice, despite the addition of large amounts of new electric renewable resources paid for by ratepayers, there has been little reduction in costs related to fossil fuels. Ratepayers are being forced to pay for both the new and old resources, including fossil fuel resources that were expected to be replaced. This can have devastating financial impacts, especially for lower-income residents.

In addition, the legislature notes that, while the public utilities commission is authorized to oversee and regulate the achievement of the State's renewable portfolio standards, the State does not currently require electric utility companies to make rates more affordable for ratepayers by reducing the costs for fossil fuel-related resources when adding or converting renewable energy resources.

Accordingly, the purpose of this Act is to require and appropriate moneys for the public utilities commission to establish standards for each electric utility company that require the company to remove from the rate base a commensurate amount of costs related to fossil fuel resources when adding new or converted renewable electrical energy and renewable energy resources.

SECTION 2. Section 269-92, Hawaii Revised Statutes, is amended to read as follows:

"§269-92 Renewable portfolio standards. (a) Each electric utility company that sells electricity for consumption in the State shall establish a renewable portfolio standard of:

(1) Ten per cent of its net electricity sales by December 31, 2010;

(2) Fifteen per cent of its net electricity sales by December 31, 2015;

(3) Thirty per cent of its net electricity sales by December 31, 2020;

(4) Forty per cent of its net electricity generation by December 31, 2030;

(5) Seventy per cent of its net electricity generation by December 31, 2040; and

(6) One hundred per cent of its net electricity generation by December 31, 2045.

(b) The public utilities commission may establish standards for each electric utility company that prescribe the portion of the renewable portfolio standards that shall be met by specific types of renewable energy resources; provided that:

(1) Before January 1, 2015, at least fifty per cent of the renewable portfolio standards shall be met by electrical energy generated using renewable energy as the source, and after December 31, 2014, the entire renewable portfolio standard shall be met by electrical generation from renewable energy sources;

(2) Beginning January 1, 2015, electrical energy savings shall not count toward renewable energy portfolio standards;

(3) Where electrical energy is generated or displaced by a combination of renewable and nonrenewable means, the proportion attributable to the renewable means shall be credited as renewable energy; and

(4) Where fossil and renewable fuels are co-fired in the same generating unit, the unit shall be considered to generate renewable electrical energy (electricity) in direct proportion to the percentage of the total heat input value represented by the heat input value of the renewable fuels.

(c) The public utilities commission shall establish standards that require each electric utility company to remove from the rate base a commensurate amount of costs related to fossil fuel resources when adding new or converted renewable electrical energy and renewable energy resources, as defined in section 269-91.

[~~(c)~~] (d) If the public utilities commission determines that an electric utility company failed to meet the renewable portfolio standard, after a hearing in accordance with chapter 91, the utility shall be subject to penalties to be established by the public utilities commission; provided that if the commission determines that the electric utility company is unable to meet the renewable portfolio standards because of reasons beyond the reasonable control of the electric utility company, as set forth in subsection (d), the commission, in its discretion, may waive in whole or in part any otherwise applicable penalties.

[~~(d)~~] (e) Events or circumstances that are beyond an electric utility company's reasonable control may include, to the extent the event or circumstance could not be reasonably foreseen and ameliorated:

(1) Weather-related damage;

(2) Natural disasters;

(3) Mechanical or resource failure;

(4) Failure of renewable electrical energy producers to meet contractual obligations to the electric utility company;

(5) Labor strikes or lockouts;

(6) Actions of governmental authorities that adversely affect the generation, transmission, or distribution of renewable electrical energy under contract to an electric utility company;

(7) Inability to acquire sufficient renewable electrical energy due to lapsing of tax credits related to renewable energy development;

(8) Inability to obtain permits or land use approvals for renewable electrical energy projects;

(9) Inability to acquire sufficient cost-effective renewable electrical energy;

(10) Inability to acquire sufficient renewable electrical energy to meet the renewable portfolio standard goals beyond 2030 in a manner that is beneficial to Hawaii's economy in relation to comparable fossil fuel resources;

(11) Substantial limitations, restrictions, or prohibitions on utility renewable electrical energy projects;

(12) Non-renewable energy generated by electric generation facilities where the electric utility company otherwise does not have direct control or ownership of independent power producers, government and non-government agencies, and any persons or entities, including merchant or co-generation facilities; and

(13) Other events and circumstances of a similar nature."

SECTION 3. Section 269-95, Hawaii Revised Statutes, is amended to read as follows:

"§269-95 Renewable portfolio standards study. The public utilities commission shall:

(1) By December 31, 2007, develop and implement a utility ratemaking structure, which may include performance-based ratemaking, to provide incentives that encourage Hawaii's electric utility companies to use cost-effective renewable energy resources found in Hawaii to meet the renewable portfolio standards established in section 269-92, while allowing for deviation from the standards in the event that the standards cannot be met in a cost-effective manner or as a result of events or circumstances, such as described in section [~~269-92(d),~~] 269-92(e), beyond the control of the electric utility company that could not have been reasonably anticipated or ameliorated;

(2) Gather, review, and analyze empirical data to:

(A) Determine the extent to which any proposed utility ratemaking structure would impact electric utility companies' profit margins; and

(B) Ensure that the electric utility companies' opportunity to earn a fair rate of return is not diminished;

(3) Use funds from the public utilities special fund to contract with the Hawaii natural energy institute of the University of Hawaii to conduct independent studies to be reviewed by a panel of experts from entities such as the United States Department of Energy, National Renewable Energy Laboratory, Electric Power Research Institute, Hawaii electric utility companies, environmental groups, and other similar institutions with the required expertise. These studies shall include findings and recommendations regarding:

(A) The capability of Hawaii's electric utility companies to achieve renewable portfolio standards in a cost-effective manner and shall assess factors such as:

(i) The impact on consumer rates;

(ii) Utility system reliability and stability;

(iii) Costs and availability of appropriate renewable energy resources and technologies, including the impact of renewable portfolio standards, if any, on the energy prices offered by renewable energy developers;

(iv) Permitting approvals;

(v) Effects on the economy;

(vi) Balance of trade, culture, community, environment, land, and water;

(vii) Climate change policies;

(viii) Demographics;

(ix) Cost of fossil fuel volatility; and

(x) Other factors deemed appropriate by the commission; and

(B) Projected renewable portfolio standards to be set five and ten years beyond the then current standards;

(4) Evaluate the renewable portfolio standards every five years, beginning in 2013, and may revise the standards based on the best information available at the time to determine if the standards established by section 269‑92 remain effective and achievable; and

(5) Report its findings and revisions to the renewable portfolio standards, based on its own studies and other information, to the legislature no later than twenty days before the convening of the regular session of 2014, and every five years thereafter."

SECTION 4. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 for the public utilities commission to establish standards for each electric utility company pursuant to section 2 of this Act.

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

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

SECTION 6. This Act shall take effect upon its approval; provided that section 4 of this Act shall take effect on July 1, 2025.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	445
THIRTY-THIRD LEGISLATURE, 2025
STATE OF HAWAII