Report Title:

Energy omnibus bill

Description:

(SB2470 HD1)

THE SENATE

S.B. NO.

2470

TWENTY-SECOND LEGISLATURE, 2004

S.D. 1

STATE OF HAWAII

H.D. 1


 

A BILL FOR AN ACT

 

relating to energy.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

PART I

SECTION 1. The legislature finds that there is a need to take bold action to chart a progressive energy strategy for the State. This strategy should include the integration of Hawaii’s indigenous renewable energy resources in electricity production to promote economic stability, enhance energy security, and demonstrate environmental stewardship. While programs like the renewable energy income tax credit and the building of new power generation facilities by electric utilities may incur direct and indirect costs to the taxpayer or ratepayer, there are many other strategies that may have an insignificant or no impact on the taxpayer or ratepayer.

The purpose of this Part is to implement the following to promote the use of renewable energy technologies that may have an insignificant or no impact on the taxpayer or ratepayer:

    1. The concept of wheeling electricity derived from renewable energy sources between governmental agencies;
    2. The formation of renewable energy cooperative associations;
    3. Clarifying laws relating to the installation by private entities of solar energy devices on single-family dwellings and townhouses;
    4. Clarifying that an "eligible customer generator" also includes government entities; and
    5. Increasing the capacity of net metered facilities from ten to fifty kilowatts.

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"CHAPTER

RENEWABLE ENERGY COOPERATIVE ASSOCIATIONS

§    -1 Definitions. As used in this chapter, unless the context or subject matter requires otherwise:

"Association" means any renewable energy cooperative organized under this chapter for the mutual benefit of its members as a producer of electricity from renewable energy resources or technologies that confines its operations to purposes authorized by this chapter and restricts the return on the stock or membership capital to the limits placed thereon by this chapter.

"Board" means the board of directors.

"Domestic" refers to an association or corporation formed under the laws of the State.

"Entity" or "entities" include domestic and foreign corporations, domestic professional corporations, domestic and foreign limited liability companies, domestic and foreign nonprofit corporations, domestic and foreign business trusts, estates, domestic and foreign partnerships, domestic and foreign limited partnerships, domestic and foreign limited liability partnerships, trusts, two or more persons having joint or common economic interest, associations and cooperative associations, and state, federal, and foreign governments.

"Member" includes the holder of a membership in an association without capital stock or the holder of common stock in an association organized with capital stock.

"Membership capital" means that capital paid to a nonstock association by a member in order to be a member and have the rights of membership in the association.

"Merger" means the procedure authorized by this chapter in which one domestic or foreign entity combines with one or more domestic or foreign entities, resulting in either one surviving entity or one new entity.

"Organizing articles" means:

(1) For an association, corporation, or nonprofit corporation, the articles of incorporation;

(2) For a general partnership or limited liability partnership, the registration statement;

(3) For a limited partnership, the certificate of limited partnership; and

(4) For a limited liability company, the articles of organization.

"Other business entities" means a corporation, nonprofit corporation, general partnership, limited partnership, limited liability partnership, or limited liability company.

"Person" includes natural persons, the estates of incompetent or deceased individuals, partnerships, corporations, limited liability companies, and associations.

"Renewable resources or technologies" means electrical energy produced by wind, solar energy, hydropower, landfill gas, waste-to-energy, ocean thermal energy conversion, wave energy, biomass including municipal solid waste, biofuels or fuels derived from organic sources, hydrogen fuels derived primarily from renewable energy, or fuel cells where the fuel is derived primarily from renewable sources.

§    -2 Purposes. Under this chapter, five or more persons may form an association for the purposes of:

(1) Conducting or promoting any lawful business under the laws of the State;

(2) Generating electricity from renewable resources or technologies; and

(3) Transmitting and selling the electricity to its membership;

provided that a cooperative organized under this chapter shall derive no more than twenty-five per cent of the electricity produced by the cooperative from fossil fuels.

§     -3 Powers of the association. (a) An association formed under this chapter, or one that existed at the time this chapter took effect and that could be formed under this chapter, shall have the capacity to act possessed by natural persons, but the association shall have the authority to perform only such acts as are necessary or proper to accomplish the purposes as set forth in its articles and that are not repugnant to law. Associations shall be classified as and deemed to be nonprofit corporations, inasmuch as their primary object is not to pay dividends on invested capital but to render services and provide means and facilities by or through which the producers of electricity may receive a reasonable and fair return for their services.

(b) Without limiting or enlarging the grant of authority contained in subsection (a), every association shall have authority to:

(1) Sue and be sued in its corporate name;

(2) Have perpetual existence;

(3) Adopt and alter a corporate seal;

(4) Generate electricity from renewable resources or technologies as an association, and transmit and sell the electricity to its membership;

(5) Construct, purchase, lease, equip, maintain, operate, sell, assign, convey, lease, mortgage, pledge, and encumber electric transmission lines or systems, electric generating plants, equipment, lands, buildings, structures, easements, rights-of-way, and any other real or personal property, tangible or intangible, necessary to accomplish the purposes of this chapter;

(6) Purchase, lease as lessee, or otherwise acquire, use, exercise, sell, assign, convey, mortgage, pledge, or otherwise dispose of or encumber franchises, rights, privileges, licenses, and easements;

(7) Borrow money and otherwise contract indebtedness, and issue notes, bonds, and other evidences of indebtedness, and secure the payment thereof by mortgage, pledge, or deed of trust of, or any other encumbrance upon, any or all of its then-owned or after-acquired real or personal property, assets, franchises, revenues, or income;

(8) Construct, maintain, and operate electric transmission lines along, upon, under, and across publicly-owned lands and public thoroughfares, roads, highways, streets, alleys, bridges, and causeways in conformity with the laws of the State;

(9) Become an incorporator, promoter, manager, member, stockholder, or owner of other corporations or associations, and conduct its business and exercise its powers within this State and participate with other persons in any corporation, limited liability company, association, partnership, limited partnership, joint venture, or other association of any kind or in any transaction, undertaking, or arrangement that the participating person would have power to conduct by itself, regardless of whether the participation involves sharing or delegation of control with or to others;

(10) Adopt, amend, and repeal bylaws; and

(11) Perform any other acts and exercise any other powers that may be necessary to accomplish the purpose for which the association is organized.

§     -4 Name. Section 414D-61 shall apply to

associations formed under this chapter and the name of every association shall include the words "renewable", "generation", "cooperative", and "Incorporated" (or the abbreviation "Inc."). The name shall be distinct from the name of any other cooperative or corporation organized under the laws of, or authorized to do business in, the State. Only an association doing business in the State pursuant to this chapter shall use all of the following words in its name: "renewable", "generation", and "cooperative".

§     -5 Articles of incorporation. (a) Articles of incorporation shall be certified and executed by each of the incorporators and shall contain the following:

(1) The name of the association;

(2) The mailing address of the association's principal office, the street address of the association's initial registered office, and the name of its initial registered agent at its initial registered office;

(3) The purposes and powers of the association;

(4) The proposed duration of the association;

(5) The names and addresses of persons who are to act as the initial directors and officers of the association;

(6) The names and addresses of the incorporators, and if organized with capital stock, a statement of the number of shares subscribed by each, which shall not be less than one, and the class of shares for which each subscribed;

(7) Whether the association is organized with or without capital stock, and if organized with capital stock, the total authorized number of shares and the par value of each share, if any; and if more than one class of stock is authorized, a description of the classes of shares, the number of shares in each class, the relative rights, preferences, and restrictions granted to or imposed upon the shares of each class, and the dividends to which each class shall be entitled; and

(8) If organized without capital stock, whether the property rights and interest of each member are equal or unequal, and if unequal, the rule by which the rights and interests shall be determined.

(b) The articles may also contain any other provisions consistent with law for:

(1) The regulatiion of the association's business or the conduct of its affairs;

(2) The establishment of voting districts;

(3) The election of delegates to represent the districts and the members residing therein;

(4) Voting by proxy; and

(5) The issuance, retirement, and transfer of membership and stock.

§     -6 Bylaws. The members of the association, within thirty days after its incorporation, shall adopt bylaws not inconsistent with law or the articles, and they may alter and amend the same from time to time. The bylaws must be adopted by a majority of the members voting thereon, or if the association permits its members to vote on the basis of patronage, then by a majority of members and majority of the patronage, voting thereon. The bylaws may also provide for:

(1) The time, place, and manner of calling and conducting meetings of the members, and the number of members that shall constitute a quorum;

(2) The manner of voting and the condition upon which members may vote at general and special meetings and by mail or by delegates elected by district groups or other associations, and the voting power of voters based on patronage;

(3) Subject to any provision thereon in the articles and in this chapter:

(A) The number, qualifications, compensation, duties, and terms of office of directors and officers;

(B) The time of their election; and

(C) The mode and manner of giving notice thereof;

(4) The time, place, and manner for calling and holding meetings of the board and of the officers, and the numbers that shall constitute a quorum;

(5) Rules consistent with law and the articles for the management of the association, the establishment of voting districts, the making of contracts, the issuance, retirement, and transfer of stock, and the relative rights, interests, and preferences of members and shareholders; and

(6) Penalties for violation of the bylaws.

§     -7 Members. (a) The incorporators named in the articles are thereby made members of the association, and the members shall pay for their membership or stock in the same amount and in the same manner as may be required in the case of other members.

(b) The articles may limit the amount of common stock which a member may own.

(c) Under the terms and conditions prescribed in the bylaws, a member shall lose the member's membership if the member ceases to belong to the class eligible to membership under this section, but the member shall remain subject to any liability incurred by the member while a member of the association.

(d) No member shall be personally liable for any debt or liability of the association.

(e) Unless the articles otherwise provide, no member shall have more than one vote.

§     -8 Meetings. (a) Within thirty days after the incorporation of an association the members thereof shall hold an organization meeting at a time and place fixed by the temporary board of directors. An association may provide in its bylaws for one or more regular meetings each year, which may be held within the State at the time and place designated in the bylaws.

(b) Special meetings of the members may be called by the president, the board, any three directors, or not less than ten per cent of the members.

(c) Except as otherwise provided in this chapter, written or printed notice stating the time and place of each meeting of the members and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given to each member, either personally or by mail, not less than ten days nor more than thirty-five days before the date of the meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, with postage prepaid, addressed to the member at the member's address as it appears on the records of the association.

(d) Unless the bylaws prescribe the presence of a greater percentage or number of the members for a quorum, a quorum for the transaction of business at all meetings shall be five per cent of all members, who shall be present in person. If less than a quorum is present at any meeting, a majority of those present in person may adjourn the meeting without further notice.

(e) Each member shall be entitled to one vote on each matter submitted to a vote at a meeting of the members. Voting shall be in person but, if the bylaws so provide, may also be by proxy or mail, or both. If the bylaws provide for voting by proxy or mail, the bylaws shall also prescribe the conditions under which voting shall be permitted. No person shall vote as proxy for more than three members at any meeting of the members.

(f) Any person entitled to notice of a meeting may waive the notice in writing either before or after the meeting. If any such person attends the meeting, such attendance shall constitute a waiver of notice of the meeting unless the person participates therein solely to object to the transaction of any business because the meeting has not been legally called or convened.

§     -9 Directors. (a) The business of an association shall be managed by a board of not less than five directors, each of whom shall be a member of the association. The bylaws shall prescribe the number of directors, their qualifications, other than those prescribed in this chapter, the manner of holding meetings of the board and of electing successors to directors who resign, die, or are otherwise incapable of acting as a director. The bylaws may also provide for the removal of directors from office and for the election of their successors. Directors shall not receive any salary for their services as directors and, except in emergencies, shall not be employed by the association in any capacity involving compensation without the approval of the members. The bylaws may provide that a fixed fee and expenses of attendance may be allowed to each director for attendance at each meeting of the board and for other functions duly authorized for and on behalf of the association.

(b) The directors of an association named in any articles of incorporation, merger, or conversion shall hold office until the next annual meeting of the members and until their successors are elected and qualify. At each annual meeting or, in case of failure to hold the annual meeting as specified in the bylaws, at a special meeting called for that purpose, the members shall elect directors to hold office until the next annual meeting of the members, except as otherwise provided in this chapter. Each director shall hold office for the term for which elected and until a successor is elected and qualifies.

(c) Instead of annually electing all the directors, the bylaws may provide for half of the directors, or a number as near thereto as possible, to be elected to serve until the next annual meeting of the members and that the remaining directors shall be elected to serve until the second succeeding annual meeting. Thereafter, as directors' terms expire, the members shall elect successor directors to serve until the second succeeding annual meeting after their election.

(d) Instead of electing the directors in the manner provided in subsection (b) or (c), the bylaws may provide that the members shall be elected at annual meetings to serve for terms of three years, except that the terms of the first directors elected pursuant to this subsection may be fixed in the bylaws for a number of years not exceeding three and, upon the expiration thereof, all members thereafter to be elected for terms of three years.

(e) A majority of the board shall constitute a quorum.

§     -10 Removal of director. Any member may ask for the removal of a director by filing charges with the secretary or president of the association, together with a petition signed by five per cent of the members requesting the removal of the director in question. The removal shall be voted upon at the next meeting of the members, and the association may remove the director by two-thirds of the voting power voting thereon. The director whose removal is requested shall be served with a copy of the charges not less than ten days prior to the meeting and shall have an opportunity at the meeting to be heard in person and by counsel and to present evidence; and the persons requesting the removal of a director shall have the same opportunity. In case the bylaws provide for election of directors by districts, then the petition for removal of a director must be signed by twenty per cent of the members residing in the district from which the director was elected. The board must call a special meeting of the members residing in that district to consider the removal of the director; and by two-thirds of the voting power of the members of that district voting thereon, the director in question shall be removed from office.

§     -11 Officers. The officers of an association shall consist of a president, vice president, secretary, and treasurer. The officers shall be elected annually by and from the board of directors. When a person holding any office ceases to be a director, the person shall cease to hold the office. The office of secretary and the office of treasurer may be held by the same person. The board may also elect or appoint such other officers, agents, or employees as the board deems necessary or advisable and the board shall prescribe the powers and duties of such officers, agents, or employees. Any officer may be removed from office and a successor elected in the manner prescribed in the bylaws.

§     -12 Amendments of articles of incorporation. (a) An association may amend its articles of incorporation by the affirmative vote of two-thirds of the members voting thereon at any regular meeting, or at a special meeting called for the purpose, or if the association permits its members to vote on the basis of patronage, by the affirmative vote of a majority of the members and of two-thirds of the patronage, voting thereon. A written or printed notice of the proposed amendment, and of the time and place of holding the meetings shall be delivered to each member, or mailed to the member's last known address as shown by the books of the association, at least thirty days prior to any such meetings. No amendment affecting the preferential rights of any outstanding stock shall be adopted until the written consent of the holders of two-thirds of the outstanding preference shares has been obtained.

(b) After an amendment has been adopted, articles of amendment shall be certified and executed by the president or vice president and by the treasurer or secretary or assistant secretary, and filed as in the case of articles of incorporation, including the payment of fees.

§     -13 Referendum. The articles or bylaws may provide that upon demand of two-fifths of all the directors, any matter of policy that has been approved or passed by the board shall be referred to the members for their approval before it becomes effective. No referendum shall be allowed unless it is demanded by the required number of directors at the meeting at which the matter of policy in question is adopted.

§     -14 Merger; procedures; approval by members. (a) Pursuant to a plan of merger, any association organized under this chapter may merge with one or more domestic professional corporations, one or more associations, or other business entities formed or organized under the laws of this State, any state or territory of the United States, any foreign jurisdiction, or any combination thereof, with one of the domestic professional corporations, associations, or other business entities whether domestic or foreign, being the surviving entity as provided in the plan; provided that the merger is permitted by the law of the state or country under whose law each foreign association or entity that is a party to the merger is organized.

(b) The board or a committee selected by the board or the members shall adopt a plan of merger that sets forth:

(1) The names of the entities proposing to merge;

(2) The name of the surviving entity;

(3) The manner and basis of converting the stock or membership of each association into stock or membership in the surviving entity;

(4) The terms of the merger;

(5) The proposed effect of the merger on the members of the association; and

(6) Amendments, if any, to the organizing articles of the surviving entity or, if no amendments are desired, a statement that the organizing articles of the surviving entity shall not be amended pursuant to the merger.

(c) The board of each association shall mail a notice of the proposed merger to each member. The notice shall contain the full text of the merger plan and the time and place of the meeting at which the plan will be considered. An association with more than two hundred members may publish the notice as provided in section -12.

(d) At the meeting, a vote of the members shall be taken on the proposed plan; provided that a quorum of the members is registered as being present or represented by proxy vote at the meeting. The plan shall be approved upon receiving the affirmative vote of:

(1) Two-thirds of the votes cast; or

(2) For an association with articles or bylaws requiring more than two-thirds of the votes cast or other conditions for approval, a proportion of the votes cast or a number of total members as required by the articles or bylaws, and the conditions for approval in the articles or bylaws have been satisfied.

After the plan has been approved, the chair, vice chair, president, vice president, secretary, or assistant secretary of each association merging shall sign the articles of merger which shall also be signed on behalf of each other entity that is a party to the merger.

(e) The articles of merger shall be filed with the director of commerce and consumer affairs. The articles shall set forth:

(1) The name and jurisdiction of each entity that is a party to the merger, and the name, address, and jurisdiction of the surviving entity;

(2) A statement that the plan of merger has been approved by each entity involved in the merger in accordance with the applicable laws of each entity;

(3) A statement indicating any changes in the organizing articles of the surviving entity to be given effect by the merger; provided that if no changes are made, a statement that the organizing articles of the surviving entity shall not be amended pursuant to the merger; and

(4) A statement that includes:

(A) An agreement that the surviving entity may be served with process in this state in any action or proceeding for the enforcement of any liability or obligation of any entity previously subject to suit in this state which is to merge;

(B) An irrevocable appointment of a resident of this State as its agent to accept service of process in any such proceeding, that includes the resident's street address in this State; and

(C) An agreement for the enforcement, as provided in this chapter, of the right of any dissenting member, shareholder, or partner to receive payment for their interest against the surviving entity.

Articles of merger shall act as articles of dissolution or an application for a certificate of withdrawal for the respective domestic or foreign entity that is not the surviving entity in the merger.

(f) The merger shall become effective upon the effective date and time of filing the articles of merger, or upon a date and time subsequent to the filing as set forth in the articles, but not more than thirty days after being filed.

(g) When a merger takes effect:

(1) The separate existence of each entity that is a party to the merger, other than the surviving entity, terminates;

(2) All property owned by each of the entities that are parties to the merger vests in the surviving entity;

(3) All debts, liabilities, and other obligations of each entity that is a party to the merger become the obligations of the surviving entity;

(4) An action or proceeding pending by or against an entity that is party to a merger may be continued as if the merger had not occurred or the surviving entity may be substituted as a party to the action or proceeding; and

(5) Except as prohibited by other law, all rights, privileges, immunities, powers, and purposes of every entity that is a party to a merger become vested in the surviving entity.

(h) If a surviving entity fails to appoint or maintain an agent designated for service of process in this State or the agent for service of process cannot with reasonable diligence be found at the designated office, service of process may be made upon the surviving entity by sending a copy of the process by registered or certified mail, return receipt requested, to the surviving entity at the address set forth in the articles of merger. Service is effected under this subsection at the earliest of:

(1) The date the surviving entity receives the process, notice, or demand;

(2) The date shown on the return receipt, if signed on behalf of the surviving entity; or

(3) Five days after its deposit in the mail, if mailed postpaid and correctly addressed.

(i) The rights of creditors shall not be impaired by the merger without the creditors' consent.

(j) The director of commerce and consumer affairs may charge a filing fee for filing the articles.

(k) For the purposes of this section, an association shall also include associations organized under chapters 421 or 421C.

§     -15 Voluntary dissolution. Chapter 414, relating to the voluntary dissolution of profit corporations, and chapter 414D, relating to the voluntary dissolution of nonprofit corporations, shall apply, as the case may be, to associations formed under this chapter except that the dissolution shall be approved at a meeting duly called and held for the purpose by not less than two-thirds of the voting power voting thereon.

§     -16 Filing and recording articles of incorporation, etc. (a) The articles of incorporation and any articles of amendment thereof shall be filed in the office of the director of commerce and consumer affairs and shall at all times during business hours be open to the inspection of the public without charge.

(b) Upon the filing of the articles of incorporation with the director, the persons who have subscribed the articles, and their associates, successors, and assigns, shall:

(1) Be a body corporate by the name and style provided in the articles;

(2) Have succession and corporate existence for such term as shall have been agreed upon, which may be perpetual;

(3) Have all of the powers and be subject to all of the liabilities provided for in this chapter; and

(4) Be subject to all general laws in regard to the associations.

(c) No person dealing with the association shall be charged with constructive notice of the contents of the articles or amendments thereto by reason of the filing or recording.

(d) Except for annual reports, statutes and fees that apply to domestic profit corporations shall apply to stock associations. Except for annual reports, statutes and fees that apply to domestic nonprofit corporations shall apply to nonstock associations.

§     -17 Revenues. (a) Except as otherwise determined by a vote of the members of the association, revenues of an association for any fiscal year in excess of the following listed items shall be distributed by the association to its members in accordance with the association's bylaws:

(1) Amounts necessary to defray the expenses of operation and maintenance of facilities of the association during such fiscal year;

(2) Amounts necessary to pay interest and principal obligations of the association coming due in such fiscal year;

(3) Amounts necessary to finance, or to provide a reserve for the financing of, the construction or acquisition by the association of additional facilities to the extent determined by the board; and

(4) Amounts necessary to provide a reserve for the payment of indebtedness of the association in an amount not less than the total of the interest and principal payments in respect thereof required to be made during the next following fiscal year.

(b) Nothing in this section shall be construed to prohibit the payment by an association of all or any part of its indebtedness prior to the date when the payment shall become due.

§     -18 Powers of the board of directors. (a) Except as provided in subsection (b), the board of an association shall have full power and authority, without authorization by the members thereof, to authorize the execution and delivery of a mortgage or mortgages or a deed or deeds of trust of, or the pledging or encumbering of, any or all of the property, assets, rights, privileges, licenses, franchises, and permits of the association, whether acquired or to be acquired, and wherever situated, as well as the revenues and income therefrom, all upon such terms and conditions as the board shall determine, to secure any indebtedness of the association.

(b) An association may not otherwise sell, mortgage, lease, or otherwise dispose of or encumber all or a substantial portion of its property unless such sale, mortgage, lease, or other disposition or encumbrance is authorized by the affirmative vote of not less than a majority of all the members of the association.

§     -19 Members. (a) No member of an association shall be liable or responsible for any debts of the association and the property of the members shall not be subject to execution therefor.

(b) If a member of an association is located within the certificated territory of a retail electric supplier, the supplier may charge the member of the association a monthly fee that reflects the cost of providing standby electric service, distribution system repair and maintenance, and other reasonable costs of being the provider of last resort.

§     -20 General corporation laws, when applicable. Except where otherwise provided, chapter 414 shall apply to associations organized under this chapter.

§     -21 Application to existing association. Except where otherwise expressly stated in this chapter, this chapter shall be applicable to any existing association formed under any law of this State providing for the incorporation of a renewable energy association for any purpose for which an association may be formed under this chapter.

§     -22 Annual reports. (a) An association formed under this chapter shall file with the director of commerce and consumer affairs an annual report. The annual report shall contain:

(1) The name of the association;

(2) The mailing address of its principal office, the address of its registered office in this State, and the name of its registered agent at its registered office in the State; and

(3) A general statement of its business operations during the fiscal year that includes:

(A) The amount of capital stock paid up;

(B) The number of shareholders, if a stock corporation, or the number of members and the amount of membership fees received, if a nonstock association;

(C) An income statement; and

(D) Its balance sheet.

(b) The annual report shall be filed within the time periods prescribed in subsections (c) and (d).

(c) Notwithstanding any of the provisions of this chapter to the contrary, annual reports reflecting the period from January 1, 2002, through December 31, 2002, that would otherwise be required, may be voluntarily filed with the department director if the annual report complies with the requirements of this section.

(d) Effective January 1, 2003, for associations whose date of registration in this state falls between:

(1) January 1 and March 31, an annual report shall be filed on or before March 31 of each year and shall reflect the state of the association's affairs as of January 1 of the year when filed;

(2) April 1 and June 30, an annual report shall be filed on or before June 30 of each year and shall reflect the state of the association's affairs as of April 1 of the year when filed;

(3) July 1 and September 30, an annual report shall be filed on or before September 30 of each year and shall reflect the state of the association's affairs as of July 1 of the year when filed; and

(4) October 1 and December 31, an annual report shall be filed on or before December 31 of each year and shall reflect the state of the association's affairs as of October 1 of the year when filed;

provided that if an association is formed in the same year in which the annual report is due, the association shall not be required to file an annual report for that year. Thereafter, the association shall comply with the requirements of this section.

(e) A copy of the report shall be submitted to the members at their annual meeting, or mailed to each member of the association, or printed in an official publication of the association.

§     -23 Agreements for interconnection. Agreements for interconnection between an association and a public utility shall be subject to public utility commission review and approval.

§     -24 Special purpose revenue bonds. The director of budget and finance may issue special purpose revenue bonds pursuant to chapter 39A to assist project parties under this chapter.

§     -25 Fees. The public utility commission shall establish standard provisions, including applicable fees, for agreements providing for interconnection between the facilities of an electric public utility and a generator that generates electricity from renewable resources or technologies.

§     -26 Taxation. To obtain the exemptions from taxation granted by this section or any other law, the association annually shall file with the director of taxation a copy of its report made under section -22, and in addition thereto, within ninety days after the close of its fiscal year, shall file with the tax assessor of each district in which there are persons doing business to whom it has paid, during the preceding fiscal year, any proceeds of goods marketed, a report showing the name of each person to whom the proceeds were paid, the total proceeds of sales for which such person is taxable under chapter 237 for the fiscal year, and the rate or rates of such tax applicable thereto or to the several amounts thereof, as the case may be."

SECTION 3. Chapter 269, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§269-    Wheeling; renewable energy; government agencies; rules. (a) A government agency may engage in wheeling of electricity produced by its facilities from renewable energy resources.

(b) The commission may disallow a wheeling project if the commission determines that the project is either:

(1) Detrimental to the electric utility company; or

(2) Not in the public interest.

(c) The commission may adopt rules or tariffs to effectuate the purposes of this section.

(d) As used in this section:

"Electric utility company" shall have the same meaning as in section 269-91.

"Government agency" means any federal, state, or county department, commission, board, bureau, office, or other government establishment, or any quasi-public institution that is supported in whole or in part by government funds.

"Intra-governmental agencies" are:

(1) Two or more county government agencies located on the same island;

(2) Two or more state government agencies located on the same island; or

(3) Two or more federal government agencies located on the same island.

"Renewable energy" shall have the same meaning as in section 269-91.

"Wheeling" means the use of an electric transmission system or distribution facility that is owned, controlled, or leased by an electric utility company to transmit electricity between intra-governmental agencies."

SECTION 4. Section 196-7, Hawaii Revised Statutes, is amended to read as follows:

"[[]§196-7[]] Placement of solar energy devices. (a) Notwithstanding any law to the contrary, no person shall be prevented by any covenant, declaration, bylaws, restriction, deed, lease, term, provision, condition, codicil, [or] contract, or similar binding agreement, however worded, from installing a solar energy device on any single-family residential dwelling or townhouse that the person owns. Any provision in any lease, instrument, or contract contrary to the intent of this section shall be void[.] and unenforceable.

[(b) For the purposes of this section, "solar energy device" means any identifiable facility, equipment, apparatus, or the like, including a photovoltaic cell application, that is applicable to a single-family residential dwelling or townhouse and makes use of solar energy for heating, cooling, or reducing the use of other types of energy dependent upon fossil fuel for generation.]

(b) The provisions of subsection (a) shall supersede all other provisions to the contrary, including but not limited to section 514A-89, regardless of the legal form of the private entity in which any single-family dwelling or townhouse is situated.

(c) Every private entity shall adopt rules that provide for the placement of solar energy devices. The rules shall facilitate the placement of solar energy devices and shall not unduly restrict such placement so as to render the device more than twenty-five per cent less efficient or to increase the cost of the device by more than fifteen per cent. No private entity shall assess, charge, or otherwise cause any homeowner to pay any fees for placement of any solar energy device.

(d) Any person may place a solar energy device on any single-family residential dwelling or townhouse owned by that person without prior approval from any private entity; provided that the person shall register that device with the private entity of record, if any, within a reasonable time period.

(e) Any person who places a solar energy device on any single-family residential dwelling or townhouse owned by that person, where the device is located on a common element or limited common element, is responsible for the following common element or limited common element costs attributable to the device:

(1) Damages and repair costs;

(2) Removal and replacement costs; and

(3) Maintenance and repair costs.

(f) For the purposes of this section:

"Private entity" means any association of homeowners, community association, condominium association, cooperative, or any other nongovernmental entity to which a homeowner is subject to compliance with covenants, bylaws, and administrative provisions of that private entity.

"Solar energy device" means any identifiable facility, equipment, apparatus, or the like, including a photovoltaic cell application, that is applicable to a single-family residential dwelling or townhouse and makes use of solar energy for heating, cooling, or reducing the use of other types of energy dependent upon fossil fuel for generation.

"Townhouse" means a series of individual apartments or units having architectural unity and common elements, with each apartment or unit extending from ground to roof or from the first or second floor to roof, and where apartments or units may share a common wall or be free-standing structures, including townhouse projects that are created pursuant to chapters 421J and 514A, as well as projects that are not created pursuant to those chapters but are governed by an association; provided that "townhouse" shall not include any apartments or units located in a building of more than three stories."

SECTION 5. Section 269-1, Hawaii Revised Statutes, is amended by amending the definition of "public utility" to read as follows:

""Public utility" includes every person who may own, control, operate, or manage as owner, lessee, trustee, receiver, or otherwise, whether under a franchise, charter, license, articles of association, or otherwise, any plant or equipment, or any part thereof, directly or indirectly for public use, for the transportation of passengers or freight, or the conveyance or transmission of telecommunications messages, or the furnishing of facilities for the transmission of intelligence by electricity by land or water or air within the State, or between points within the State, or for the production, conveyance, transmission, delivery, or furnishing of light, power, heat, cold, water, gas, or oil, or for the storage or warehousing of goods, or the disposal of sewage; provided that the term:

(1) Shall include any person insofar as that person owns or operates a private sewer company or sewer facility;

(2) Shall include telecommunications carrier or telecommunications common carrier;

(3) Shall not include any person insofar as that person owns or operates an aerial transportation enterprise;

(4) Shall not include persons owning or operating taxicabs, as defined in this section;

(5) Shall not include common carriers transporting only freight on the public highways, unless operating within localities or along routes or between points that the public utilities commission finds to be inadequately serviced without regulation under this chapter;

(6) Shall not include persons engaged in the business of warehousing or storage unless the commission finds that regulation thereof is necessary in the public interest;

(7) Shall not include:

(A) The business of any carrier by water to the extent that the carrier enters into private contracts for towage, salvage, hauling, or carriage between points within the State and the carriage is not pursuant to either an established schedule or an undertaking to perform carriage services on behalf of the public generally; and

(B) The business of any carrier by water, substantially engaged in interstate or foreign commerce, transporting passengers on luxury cruises between points within the State or on luxury round-trip cruises returning to the point of departure;

(8) Shall not include any person who:

(A) Controls, operates, or manages plants or facilities for the production, transmission, or furnishing of power primarily or entirely from nonfossil fuel sources; and

(B) Provides, sells, or transmits all of that power, except such power as is used in its own internal operations, directly to a public utility for transmission to the public;

(9) Shall not include a telecommunications provider only to the extent determined by the commission pursuant to section 269-16.9;

(10) Shall not include any person who controls, operates, or manages plants or facilities developed pursuant to chapter 167 for conveying, distributing, and transmitting water for irrigation and such other purposes that shall be held for public use and purpose; [and]

(11) Shall not include any person who owns, controls, operates, or manages plants or facilities for the reclamation of wastewater; provided that:

(A) The services of the facility shall be provided pursuant to a service contract between the person and a state or county agency and at least ten per cent of the wastewater processed is used directly by the State or county [which] that has entered into the service contract;

(B) The primary function of the facility shall be the processing of secondary treated wastewater that has been produced by a municipal wastewater treatment facility that is owned by a state or county agency;

(C) The facility shall not make sales of water to residential customers;

(D) The facility may distribute and sell recycled or reclaimed water to entities not covered by a state or county service contract; provided that, in the absence of regulatory oversight and direct competition, the distribution and sale of recycled or reclaimed water shall be voluntary and its pricing fair and reasonable. For purposes of this [[]subparagraph[]], "recycled water" and "reclaimed water" mean treated wastewater that by design is intended or used for a beneficial purpose; and

(E) The facility shall not be engaged, either directly or indirectly, in the processing of food wastes[.]; and

(12) Shall not include any renewable energy cooperative associations organized under chapter .

In the event the application of this chapter is ordered by the commission in any case provided in paragraphs (5), (6), (9), and (10), the business of any public utility that presents evidence of bona fide operation on the date of the commencement of the proceedings resulting in the order shall be presumed to be necessary to public convenience and necessity, but any certificate issued under this proviso shall nevertheless be subject to such terms and conditions as the commission may prescribe, as provided in sections 269-16.9 and 269-20."

SECTION 6. Section 269-101, Hawaii Revised Statutes, is amended by amending the definition of "eligible customer-generator" to read as follows:

""Eligible customer-generator" means a metered residential or commercial customer, including a government entity, of an electric utility who owns and operates a solar, wind turbine, biomass, or hydroelectric energy generating facility, or a hybrid system consisting of two or more of these facilities, with a capacity of not more than [ten] fifty kilowatts, that is:

(1) Located on the customer's premises;

(2) Operated in parallel with the utility's transmission and distribution facilities;

(3) In conformance with the utility's interconnection requirements; and

(4) Intended primarily to offset part or all of the customer's own electrical requirements."

SECTION 7. Section 514A-89, Hawaii Revised Statutes, is amended to read as follows:

"514A-89 Certain work prohibited. No apartment owner shall do any work which could jeopardize the soundness or safety of the property, reduce the value thereof, or impair any easement or hereditament, nor may any apartment owner add any material structure or excavate any additional basement or cellar, without in every such case the consent of seventy-five per cent of the apartment owners, together with the consent of all apartment owners whose apartments or limited common elements appurtenant thereto are directly affected, being first obtained; provided that nonmaterial structural additions to the common elements, including, without limitation, the installation of solar energy devices[,] except as provided for in chapter 196-7, or additions to or alterations of an apartment made within such apartment or within a limited common element appurtenant to and for the exclusive use of the apartment shall require approval only by the board of directors of the association of apartment owners and such percentage, number, or group of apartment owners as may be required by the declaration or bylaws.

As used in this section:

"Nonmaterial structural additions to the common elements"[, as used in this section,] means a structural addition to the common elements which does not jeopardize the soundness or safety of the property, reduce the value thereof, impair any easement or hereditament, detract from the appearance of the project, interfere with or deprive any nonconsenting owner of the use or enjoyment of any part of property, or directly affect any nonconsenting owner. [For purposes of this section, "solar]

"Solar energy device" means any new identifiable facility, equipment, apparatus, or the like which makes use of solar energy for heating, cooling, or reducing the use of other types of energy dependent upon fossil fuel for its generation; provided that if the equipment sold cannot be used as a solar device without its incorporation with other equipment, it [must] shall be installed in place and ready to be made operational in order to qualify as a ["]solar energy device["]."

PART II

SECTION 8. 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 9. 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 10. 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 provide the incentives to encourage Hawaii’s electric utilities to use renewable energy resources found in Hawaii to meet the renewable portfolio standards established in section 269-92, 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) 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. 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

(4) 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 11. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 12. This Act shall take effect upon its approval; provided that section 2 shall take effect on July 1, 2005.