Auditor; Statewide Energy Audit; PUC Management Audit
Requires the auditor to conduct a statewide energy audit, which is to include a management audit of the public utilities commission. Allows the auditor to contract with an independent consultant as may be necessary. Requires reports to the legislature and governor. Appropriates funds.
TWENTY-SECOND LEGISLATURE, 2003
STATE OF HAWAII
A BILL FOR AN ACT
relating to energy.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that energy is a critical determining factor in providing for economic prosperity, environmental well-being, and the desired quality of life for Hawaii residents and businesses today and for the future. How energy is generated and distributed is changing, thus placing Hawaii at a very critical juncture.
The legislature finds that short-term thinking and the present statutory scheme to regulate the energy sector do not work. A thoughtful, macro approach must be applied to move Hawaii's energy sector from the industrial age to the information age. Clarifying and advancing ethical, scientific, political, and economic knowledge to form an intelligent foundation of common purpose must be articulated in policy and easily carried out in regulation and implementation.
Hawaii's energy and transportation sectors are largely dependent on fossil fuels. This dependency makes Hawaii's economy vulnerable because of oil pricing volatility and supply interruptions that are not under Hawaii's control. The State must develop a set of policies that place its own energy future more directly under its own control, and do not leave it subject, to the degree it currently is, to the volatility of international energy markets. The usage of fossil fuels raises concerns about pollution and issues of global climate change. Concerns of energy security issues in light of the events of September 11, 2001, must also be addressed in the context of Hawaii's geographic isolation.
Currently, Hawaii's energy policy addresses these important concerns. However, Hawaii's existing regulatory structure, costing, and implementation methods place barriers to the implementation of these policies. Therefore, the legislature reaffirms the State's energy objectives as stated in section 226-18(a), Hawaii Revised Statutes, namely:
(1) Dependable, efficient, and economical statewide energy systems capable of supporting the needs of the people;
(2) Increased energy self-sufficiency where the ratio of indigenous to imported energy use is increased;
(3) Greater energy security in the face of threats to Hawaii's energy supplies and systems; and
(4) Reduction, avoidance, or sequestration of greenhouse gas emissions from energy supply and use.
The legislature further finds that two significant trends, decentralization and miniaturization, have already affected telecommunications and information technology. These trends now play an important role in changing the way electricity is generated and transmitted. Traditional large and centralized electrical generation plants that support economy of scale models are giving way to decentralized distributed power facilities that boost fuel efficiency, are environmentally clean and quiet, and are capable of providing premium power essential for promoting information technology. Further, the transmission and distribution grids no longer transmit power in one direction--from a centralized generating facility to the electricity consumer. Rather, distribution systems in particular now transmit power in multiple directions utilizing concepts such as net energy metering, which allows electricity customers to generate power and send excess power back to the grid. The legislature finds that distributed power has the potential to create vast webs of energy suppliers and consumers.
Hawaii is ideally situated to take advantage of other technology advancements, such as hydrogen as an energy carrier and fuel cells, to maximize its renewable energy potential in the future and marry electrical distribution systems with the transportation sector. These advancements move Hawaii a step closer to the vision of a hydrogen-based economy and its desired goals of energy self-sufficiency and energy security. However, this vision and these goals will be difficult to realize if regulatory barriers are not addressed in a timely manner.
In light of the availability of various generation and distribution energy systems, changing consumer preferences, environmental imperatives, technological advancements, and security issues arising from September 11th, the legislature finds that a comprehensive statewide review, examination, and analysis of Hawaii's existing energy situation, in particular Hawaii's electrical transmission and distribution system, in relation to the State's energy objectives is in the best interest of the State.
The legislature further finds that a comprehensive statewide energy audit must also include a management audit of the public utilities commission to ensure that the commission is equipped to handle the challenges of the twenty-first century.
The legislature finds that previous management audits of the public utilities commission were conducted in 1975 and 1989 at the request of the legislature. The 1975 audit, consisting of three volumes, found serious organizational, procedural, and staffing deficiencies at the commission, and spurred the legislature to examine and reorganize the State's public utilities regulatory program that resulted in legislative changes. The 1989 audit also found serious concerns with the commission. The audit found that heavy workloads and inadequate resources, among other things, were often cited as reasons for not performing such tasks as bringing rules up to date or developing more adequate complaint handling and consumer education programs.
The legislature further finds that the public utilities commission is currently faced with many challenges in meeting the needs of Hawaii's residents in a changing global economy. Since the 1989 audit of the commission, there have been significant technological advances in such areas as telecommunications and electrical restructuring that require a reexamination of the role of the commission's regulatory activities. The legislature also recognizes the need for a regulatory structure that fosters innovation and efficiency in dealing with the competitiveness of a new economy. Therefore, a management audit would be helpful in assisting the public utilities commission in making such a transition.
Accordingly, the purpose of this Act is to require the auditor to:
(1) Conduct a comprehensive statewide energy audit, which shall include:
(A) A comprehensive statewide review, examination, and analysis of Hawaii's existing energy situation in relation to the State's energy objectives; and
(B) A management audit of the public utilities commission to assess the adequacy of the present utility regulatory process in dealing with issues, problems, and developments in complex and changing areas, such as telecommunications, energy deregulation, and intergovernmental relations; and
(2) Report findings and recommendations to the legislature and governor before the convening of the regular session of 2004.
SECTION 2. Statewide energy audit. (a) The auditor shall conduct a statewide energy audit consisting of:
(1) A comprehensive statewide review, examination, and analysis of Hawaii's existing energy situation in relation to the State's energy objectives; and
(2) A management audit of the public utilities commission to assess the adequacy of the present utility regulatory process in dealing with issues, problems, and developments in complex and changing areas, such as telecommunications, energy deregulation, and intergovernmental relations.
(b) The statewide energy audit shall:
(1) Evaluate the appropriateness and applicability of current utility legislation;
(2) Review the adequacy of coverage of current public utilities commission policies, rules, and procedures;
(3) Review the management of the public utilities commission and the division of consumer advocacy in terms of providing technical and analytical staff support in carrying out the duties of the commission and the division, respectively, and enforcement of the commission's rules;
(4) Review the effectiveness of the public utilities commission and the division of consumer advocacy in dealing with telecommunications, energy, and other utility issues and evaluate the role of the consumer advocate in relation to promoting the State's energy objectives;
(5) Evaluate the role, guiding principles, and policy framework of the public utilities commission in relation to:
(A) The State's energy objectives;
(B) Regulatory reform;
(C) Encouraging the development and integration of clean, efficient, reliable and cost effective energy technologies into the generation, transmission, and distribution system; and
(D) Developing a power system that integrates new technology in a cost-effective way, while taking environmental concerns into account;
(6) Evaluate the current regulatory system and monopolistic structure of the electric utilities in relation to:
(A) Promoting the State's energy objectives;
(B) Instituting innovations made possible by technological advancements such as small scale power generation;
(C) Implementing technologically advanced facilities in place of existing and aging facilities or constructing facilities utilizing older, traditional technology; and
(D) The effectiveness in Hawaii of the electric utility monopoly versus other market models. This examination shall consider the unique position of Hawaii as not interconnected with a larger power grid;
(7) Conduct a review of rate-of-return regulations and performance-based regulations in advancing the State's energy objectives;
(8) Evaluate means to integrate large-scale centralized with small scale, distributed power systems in the context of the State's energy objectives;
(9) Consider the dilemma of cost-saving on-site power generation by large power users and the resulting increase in cost to small businesses and residential ratepayers who remain on the grid;
(10) Challenge and question the basic assumptions underlying the State's energy objectives and policies for facility systems in chapter 226, Hawaii Revised Statutes, and their application and implementation;
(11) Review the functions, organizational structures, and staffing levels of all state and county agencies that directly and materially regulate energy;
(12) Examine federal funds received by the State and counties that directly and materially relate to the energy situation in Hawaii and determine methods to maximize the receipt of those federal funds;
(13) Establish methods for reporting and measuring compliance with the State's energy objectives and policies, or recommended energy objectives and policies; and
(14) Make recommendations, including:
(A) Any necessary policy changes to ensure the energy security of the State; and
(B) Proposed statutory or constitutional amendments that will ensure the energy security of the State.
(c) The public utilities commission and all other departments, agencies, and offices of the State and any private companies or agencies receiving state funds shall cooperate fully with and provide assistance to the auditor with respect to its statewide energy audit and shall respond promptly to the auditor's request in conducting the statewide energy audit, including requests for records and other information in the course of the audit.
(d) In conducting the audit under this section, the auditor may contract with an independent consultant in accordance with chapter 103D, Hawaii Revised Statutes, as may be necessary to assist the auditor in conducting the audit.
(e) The auditor shall report findings and recommendations, including any proposed legislation, to the legislature and the governor no later than twenty days prior to the convening of the regular session of 2004.
SECTION 3. 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 2003-2004, for the auditor to conduct the statewide energy audit required by this Act, including contracting with an independent consultant pursuant to chapter 103D, Hawaii Revised Statutes, as may be necessary to assist the auditor in conducting the audit.
SECTION 4. The sum appropriated shall be expended by the office of the auditor for the purposes of this Act.
SECTION 5. This Act shall take effect on July 1, 2003.