Report Title:

Statewide Energy Audit; Auditor, National Conference of State Legislatures


Requires the auditor to contract with the National Conference of State Legislatures to conduct a statewide energy audit; establishes scope of the audit; appropriates $50,000 for fiscal year 2003-2004.


S.B. NO.









relating to energy.



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.

Dee Hock, the former chief executive officer of VISA International notes, "If one is to properly understand events and to influence the future, it is essential to master four ways of looking at things: as they were, as they are, as they might become, and as they ought to be."

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 put 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. And, concerns of energy security issues made more obvious by the events of September 11, 2001, must 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 effectuation of these policies. Therefore, the legislature reaffirms the State’s energy objectives of:

(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.

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 like net energy metering, which allows electricity customers to generate power and send any excess power back to the grid. 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. Such 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.

This audit must be comprehensive and objective. The National Conference of State Legislatures (NCSL), of which the State of Hawaii is a member, is a bipartisan organization that serves legislators and their staffs. Recognizing the need of legislatures in addressing policy and technical aspects surrounding electrical deregulation and utility restructuring among other energy issues, the NCSL established the Energy Project offering state legislatures assistance focused on this subject matter. The NCSL Energy Project has completed or is in the process of conducting energy audits for Montana and Rhode Island and would be available to conduct an audit for Hawaii at a reasonable cost and within the time period specific by this measure.

The purpose of this Act is to require the auditor to contract with the National Conference of State Legislatures to conduct a comprehensive statewide energy audit.

SECTION 2. Chapter 103D, Hawaii Revised Statutes, to the contrary notwithstanding, the auditor shall contract with the National Conference of State Legislatures to conduct a statewide energy audit consisting of a comprehensive statewide review, examination, and analysis of Hawaii's existing energy situation in relation to the State's energy objectives. The statewide energy audit shall:

(1) 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;

(2) Evaluate the current regulatory system and monopolistic structure of the electric utilities in relation to:

(A) Promoting the State's energy objectives;

(B) The institution of 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;

(3) Conduct a review of rate-of-return regulations and performance-based regulations in advancing the State's energy objectives;

(4) Evaluate means to integrate large-scale centralized with small scale, distributed power systems in the context of the State's energy objectives;

(5) 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;

(6) Challenge and question the basic assumptions underlying the State's energy objectives and policies for facility systems—energy in chapter 226, Hawaii Revised Statutes, and its application and implementation;

(7) Evaluate the role of the consumer advocate in relation to promoting the State's energy objectives;

(8) Review the functions, organizational structures, and staffing levels of all state and county agencies that directly and materially regulate energy;

(9) 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 such federal funds;

(10) Establish methods for reporting and measuring compliance with the State's energy objectives and policies, or recommended energy objectives and policies; and

(11) 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.

For purposes of this Act, "consultant" means the National Conference of State Legislatures.

SECTION 3. All 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 consultant with respect to its statewide energy audit, and shall respond promptly to the consultant's request in conducting the statewide energy audit, including requests for records and other information in the course of the audit.

SECTION 4. The consultant shall:

(1) Report its progress on the statewide energy audit to the governor and the legislature no later than twenty days before the convening of the regular session of 2004; and

(2) Submit its final report of its findings and recommendations to the governor and the legislature no later than twenty days before the convening of the regular session of 2005.

SECTION 5. There is appropriated out of the general revenues of the State of Hawaii the sum of $50,000, or so much thereof as may be necessary for fiscal year 2003-2004, for a statewide energy audit.

The sum appropriated shall be expended by the auditor for the purposes of this Act.

SECTION 6. This Act shall take effect on July 1, 2003.