STAND. COM. REP. NO. 459-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 1946
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Energy and Environmental Protection, to
which was referred H.B. No. 1946 entitled: 

     "A BILL FOR AN ACT RELATING TO ENERGY CONSERVATION,"

begs leave to report as follows:

     The purpose of this bill is to require state and county
government agencies to retrofit buildings to save energy through
performance contracting or other suitable mechanisms.  The bill
provides that agencies that retrofit will receive funding for
energy expenditures at a level "equal and proportionate" to the
funding the agency received before the energy efficiency measures
were taken.

     Supporting the bill were Councilmember Charmaine Tavares of
the Maui County Council; the Hawaii Renewable Energy Alliance;
the Sierra Club, Hawaii Chapter; and a private citizen.  The
Department of Business, Economic Development, and Tourism and
Hawaiian Electric Company testified in support of the measure and
both offered amendments.

     Your Committee finds that the state and county governments
must take a leading role in supporting energy conservation.
Performance contracting allows agencies to finance and install
energy saving improvements by contracting with a private company
for a fee that depends upon the future results from the
improvements.  The contingent payment arrangement transfers the

 
a                                                         00-1152
 
 
                                 STAND. COM. REP. NO. 459-00
                                 Page 2

 
risk of performance from the government agency to the private
company, aiding government efforts to achieve energy savings.
This measure will decrease the State's dependence on imported
fossil fuels and move the State toward energy self-sufficiency.

     Your Committee has amended section 1 of the bill by deleting
new language on page one, lines 4-10, and replacing it with the
following language that incorporates amendments proposed by the
Department of Business, Economic Development, and Tourism and
Hawaiian Electric Company:

     "All agencies shall evaluate and identify for
     implementation energy efficiency retrofitting through
     performance contracting.  Agencies that perform energy
     efficiency retrofitting shall continue to receive
     budget appropriations for energy expenditures at an
     amount that will not fall below the pre-retrofitting
     energy budget but will rise in proportion to any
     increase in the agency's overall budget for the
     duration of the performance contract or project payment
     term."

     In making this amendment, your Committee:

     (1)  Deleted the reference to a "cost-payback period of less
          than ten years" because the statute limits the term of
          a performance contract to fifteen years.  Generally,
          the contract term for a project is determined by
          multiplying the simple payback by 2 or 2.5.  A contract
          under the current statute would be limited to a payback
          period of 7.5 years of less, fulfilling the intent of
          the measure.

     (2)  Deleted "or other suitable mechanism" as an alternative
          to performance contracting.  Since section 36-41,
          Hawaii Revised Statutes, relates to "performance
          contracting", other mechanisms would not be
          appropriate.

     (3)  Changed the comprehensive retrofitting mandate to
          provide that agencies are required to evaluate and
          identify for implementation measures that may be
          selected on the basis of energy and other criteria,
          such as aesthetics or physical site constraints.  This
          change will encourage agencies to use performance
          contracting to reduce their energy bills by allowing

 
a                                                         00-1152
 
                                 STAND. COM. REP. NO. 459-00
                                 Page 3

 
          them to keep a share of the energy savings until the
          project is paid for.

     (4)  Clarified that future budget appropriations for energy
          expenditures for agencies that retrofit are not to fall
          below the agency's pre-retrofitting budget.

     As affirmed by the record of votes of the members of your
Committee on Energy and Environmental Protection that is attached
to this report, your Committee is in accord with the intent and
purpose of H.B. No. 1946, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as H.B. No.
1946, H.D. 1, and be referred to the Committee on Finance.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Energy and
                                   Environmental Protection,



                                   ______________________________
                                   HERMINA M. MORITA, Chair

 
a                                                         00-1152