Report Title:

Renewable Energy; Renewable Portfolio Standards; PUC Study


Requires electric utilities to meet a renewable portfolio standard of 15 per cent for 2015 and a goal of 20 per cent for 2020. Directs the PUC to study the feasibility of implementing a rate structure and incentives program to encourage the use of renewable energy. Effective 7/1/2004. (SB2474 HD1)


S.B. NO.



S.D. 3


H.D. 1




relating to renewable energy.



SECTION 1. Building a sustainable future in Hawaii requires the government to take a leadership role in developing programs and initiatives designed to encourage people to live within their means. The legislature finds that a significant impediment to the goal of sustainability is the large imbalance between the amount of goods and services exported from Hawaii in comparison to the amount of goods and services imported to Hawaii. Specifically, the legislature notes that Hawaii exports only $2,000,000,000 a year in goods and services while importing $15,000,000,000 a year in goods and services.

Enterprise Honolulu stated that "a key characteristic of a healthy economy is that it exports more than it imports. If payments for imports exceed payments for exports, we have a 'trade deficit.' Just like a negative balance in your checking account impacts your household, if a trade deficit continues too long, the region's quality of life begins a downward slide."

The legislature also finds that Hawaii imports between $2,000,000,000 and $3,000,000,000 worth of oil annually. These figures represent a growing dependence on oil imports which allows electric utility companies to enjoy a financial windfall when they sell electricity to Hawaii consumers. The profits realized by electric utility companies lead to the continued importation and dependence on oil.

The legislature finds that economic diversification, import substitution, and export expansion are key to achieving sustainability. Further, import substitution may be achieved by increasing the use of renewable energy resources found in Hawaii, such as wind, solar, ocean thermal, wave, biomass resources, and others enumerated in section 269-91, Hawaii Revised Statutes, as amended by section 2 of this Act.

The purpose of this Act is to encourage import substitution by increasing the use of renewable energy resources found in Hawaii, thereby decreasing the need to import large amounts of oil annually.

In addition, renewable energy resources offer Hawaii important job creation, environmental protection, and energy security benefits. These efforts will contribute to the ultimate success of the State's efforts to develop the infrastructure for a future hydrogen energy economy based upon hydrogen produced primarily from renewable energy.

SECTION 2. Section 269-91, Hawaii Revised Statutes, is amended by amending the definition of "renewable energy" to read as follows:

""Renewable energy" means electrical energy produced by wind, solar energy, hydropower, landfill gas, waste to energy, geothermal resources, ocean thermal energy conversion, wave energy, biomass, including municipal solid waste, biofuels, or fuels derived [entirely] from organic sources, hydrogen fuels derived [entirely] from renewable energy, or fuel cells where the fuel is derived [entirely] from renewable sources. Where biofuels, hydrogen, or fuel cell fuels are produced by a combination of renewable and nonrenewable means, the proportion attributable to the renewable means shall be credited as renewable energy. Where fossil and renewable fuels are co-fired in the same generating unit, the unit shall be considered to produce renewable electricity in direct proportion to the percentage of the total heat value represented by the heat value of the renewable fuels. "Renewable energy" also means electrical energy savings brought about by the use of solar [and heat pump] water heating[.], seawater air conditioning district cooling systems, and solar air conditioning."

SECTION 3. Section 269-92, Hawaii Revised Statutes, is amended to read as follows:

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

(1) Seven per cent of its net electricity sales by December 31, 2003;

(2) Eight per cent of its net electricity sales by December 31, 2005; [and]

(3) [Nine] Ten per cent of its net electricity sales by December 31, 2010[.];

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

(5) Twenty per cent of its net electricity sales by December 31, 2020."

SECTION 4. The public utilities commission shall:

(1) Develop and implement a utility rate structure, which may include but is not limited to performance-based ratemaking, by December 31, 2006, to encourage Hawaii’s electric utilities to use renewable energy resources found in Hawaii to meet the requirements of section 3;

(2) Gather, review, and analyze empirical data to determine the extent to which this proposed utility rate structure would impact electric utility companies' profit margins and to ensure that these profit margins do not decrease for a period of five years following the implementation of this rate structure;

    1. Adopt rules to implement incentives and penalties to assist electric utility companies in meeting the renewable portfolio standards established in section 269-92, Hawaii Revised Statutes, while allowing deviation from the standard in the event of circumstances beyond the control of the utility, which could not have been reasonably anticipated or ameliorated;
    2. Using funds from its special fund, contract with qualified technical experts to conduct independent studies to be reviewed by a panel of experts from among such entities as the U.S. Department of Energy, the National Renewable Energy Laboratory, the Electric Power Research Institute, the University of Hawaii Natural Energy Institute, or other similar institutions with the required expertise. These studies shall:

(A) Make findings and recommendations to the commission as to the capability of Hawaii’s electric utility companies to increase the percentage of renewable energy established by the standard in a cost-effective manner, or whether circumstances require that the standard be adjusted. Cost effectiveness and capability shall be assessed by factors such as the impact on consumer rates, utility system reliability and stability, costs and availability of appropriate renewable energy resources and technologies, and other such criteria deemed appropriate by the commission; and

(B) Make findings and recommendations to the commission for projected standards to be set five and ten years beyond the then current standard; and

(5) Based on its own studies and those contracted under paragraph (4), the commission shall report its findings and recommendations, including, in particular, recommendations for new standards and goals, adjustments of percentages, and any proposed legislation, to the legislature no later than twenty days before the convening of the regular session of 2009, and every five years thereafter.

SECTION 5. Statutory material to be repealed is bracketed

and stricken. New statutory material is underscored.

SECTION 6. This Act shall take effect on July 1, 2004.