HOUSE OF REPRESENTATIVES

H.B. NO.

550

THIRTIETH LEGISLATURE, 2019

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

relating to renewable energy.

 

 

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

 


SECTION 1. The legislature finds that Act 97, Session Laws of Hawaii 2015, amended section 269-92, Hawaii Revised Statutes, to establish a one hundred per cent renewable portfolio standard by December 31, 2045, with the intent to transition the State away from imported fuels and toward renewable local resources that provide a secure source of affordable energy. Since that time, the need to reduce carbon emissions globally to avoid the worst impacts of climate change has become increasingly urgent. In addition, studies indicate that accelerating the adoption of renewable energy will cost less than the course laid out by the current renewable portfolio standard interim benchmarks. Speeding up the deployment of renewable energy will also create thousands of jobs and will position Hawaii at the forefront of energy innovation and investment.

Currently, the calculation of the renewable portfolio standard, based on the definition of renewable portfolio standard enacted in 2001 and amended in 2006, is the percentage of electrical energy sales that is represented by renewable electrical energy. The legislature finds that the calculation of the renewable portfolio standard based on electrical energy sales (renewable electrical energy sales divided by total electrical sales), rather than on electrical energy generation (renewable electrical energy generation divided by total electrical energy generation), overestimates the amount of renewable energy serving Hawaii's electric utility customers. There are two fundamental issues that lead to the current discrepancy:

(1) The current renewable portfolio standard calculation inflates the reported percentage of renewable energy by excluding customer-sited, grid-connected energy generation in the denominator, which becomes material with higher levels of customer-sited, grid-connected renewable energy generation and higher renewable portfolio standard percentages; and

(2) The current electrical energy sales number does not include energy losses that occur between the points of electrical energy generation and the customer meter, where sales are measured.

Failure to address these issues creates an incorrect measure of the State's progress toward its statutory goal of one hundred per cent renewable energy.

Furthermore, the legislature finds that Hawaii's energy sector is undergoing a transition to renewable energy that is strengthening the State's economy, helping to preserve the environment, and increasing the State's security. To complete this transition successfully, it is also important that all relevant entities are aligned. The legislature is concerned that requiring electric utilities but not gas utilities to increase their reliance on renewable energy creates an unfair playing field that may unintentionally harm consumers by promoting suboptimal long-lived investments in fossil fuels through gas-fired distributed electrical generation. These effects may also have short-term and long-term impacts on the viability of the State's electric and gas utilities.

The legislature finds that the simplest, fairest, and most effective solution to this concern is to also implement renewable portfolio standard targets for gas utilities that are similar to those established for electric utilities. This Act requires all gas sold for grid-connected electrical energy generation by regulated gas utility operations in the State to become more renewable over time.

The purpose of this Act is to:

(1) Amend the renewable portfolio standard interim goals for 2030 and 2040 to accelerate the adoption of renewable energy;

(2) Amend the definition of renewable portfolio standard to more accurately reflect the percentage of renewable energy used in the State; and

(3) Establish gas utility company renewable portfolio standards for electricity generation, ensuring that the State's market for gas embraces and supports the transition away from fossil fuels and toward renewable energy.

SECTION 2. Chapter 269, Hawaii Revised Statutes, is amended by adding a new subpart to part V to be appropriately designated and to read as follows:

" . Renewable Portfolio Standards for Gas Utility Companies

269-A Definitions. For the purposes of this subpart:

"Gas utility company" means a public utility, as defined in section 269-1, for the production, conveyance, transmission, delivery, or furnishing of gas.

"Renewable gas" means gas generated or produced using:

(1) Biogas, including landfill and sewage-based digester gas;

(2) Biomass, biomass crops, agricultural or animal residues and wastes, municipal solid waste, or other solid waste;

(3) Biofuels; or

(4) Hydrogen produced from renewable energy sources.

"Renewable portfolio standard" means total energy in therms from renewable gas sold divided by total heat energy in therms from gas sold, expressed as a percentage. For the purposes of this definition, the terms "renewable gas sold" and "gas sold" are limited to gas sold under regulated gas utility company operations in the State.

269-B Renewable portfolio standards for gas utility companies. (a) Each gas utility company that sells gas in the State shall establish a renewable portfolio standard of:

(1)       per cent of its net gas sales by December 31, 2024;

(2)       per cent of its net gas sales by December 31, 2029;

(3)       per cent of its net gas sales by December 31, 2034;

(4)       per cent of its net gas sales by December 31, 2039; and

(5) One hundred per cent of its net gas sales by December 31, 2045.

(b) The public utilities commission may establish standards for each gas utility company that prescribe what portion of the renewable portfolio standard shall be met by specific types of renewable gas resources; provided that where gas is composed of commingled fossil and renewable gases, the renewable gas component of the gas shall be considered to be in direct proportion to the percentage of the total heat input value represented by the heat input value of the renewable gas.

(c) If the public utilities commission determines that a gas utility company failed to meet any portion of the renewable portfolio standard, after a hearing in accordance with chapter 91, the gas utility company shall be subject to penalties established by the public utilities commission; provided that if the commission determines that the gas utility company is unable to meet the renewable portfolio standards because of reasons beyond the gas company's reasonable control, as set forth in subsection (d), the commission, in its discretion, may waive in whole or in part any otherwise applicable penalties.

(d) Events or circumstances that are beyond a gas utility company's reasonable control may include, to the extent the event or circumstance could not be reasonably foreseen and ameliorated:

(1) Weather-related damage;

(2) Natural disasters;

(3) Mechanical or resource failure;

(4) Failure of renewable gas producers or suppliers to meet contractual obligations to the gas utility company;

(5) Labor strikes or lockouts;

(6) Actions of governmental authorities that adversely affect the procurement of renewable gas under contract to a gas utility company;

(7) Inability to acquire sufficient renewable gas because of lapsing of tax credits related to renewable gas development;

(8) Inability to obtain permits or land use approvals for renewable gas projects;

(9) Inability to acquire sufficient cost-effective renewable gas;

(10) Inability to acquire sufficient renewable gas to meet the renewable portfolio standard goals by 2045 in a manner that is beneficial to Hawaii's economy in relation to comparable resources;

(11) Substantial limitations, restrictions, or prohibitions on utility renewable gas projects; or

(12) Other events or circumstances of a similar nature that could not be reasonably foreseen and ameliorated.

(e) Each gas utility company shall:

(1) By July 1, 2020, submit to the public utilities commission for review and approval a procedure that establishes how the gas utility company will measure and report its renewable portfolio standard status to the public utilities commission; and

(2) Report the progress and the steps taken toward the renewable portfolio standard goals according to the schedule established in subsection (a).

269-C Achieving gas portfolio standard. (a) A gas utility company and its affiliates may aggregate their renewable portfolios to achieve the renewable portfolio standard.

(b) If a gas utility company and its affiliates aggregate their renewable portfolios to achieve the renewable portfolio standard, the public utilities commission may distribute, apportion, or allocate the costs and expenses of all or any portion of the respective renewable portfolios among the gas utility company, the gas utility company's affiliates, and the affiliates' respective ratepayers, as is reasonable under the circumstances.

(c) A gas utility company may recover, through an automatic rate adjustment clause, any revenue requirement resulting from the distribution, apportionment, or allocation of the renewable portfolio's costs and expenses.

(d) To provide for timely recovery of the revenue requirement under subsection (c), the public utilities commission may establish a separate automatic rate adjustment clause or approve the use of a previously approved automatic rate adjustment clause without a rate case filing. The use of an automatic rate adjustment clause to recover the revenue requirement may continue until the revenue requirement is incorporated into the gas utility company's rates by its rate case.

269-D Waivers, extensions, and incentives for gas utility companies. (a) Any gas utility company failing to meet the renewable portfolio standard shall provide a written explanation to the public utilities commission within ninety days following the dates established in section 269-A(a).

(b) The public utilities commission, after allowing an appropriate period of public comment, shall grant or deny a request for a waiver from the renewable portfolio standard or for an extension to meet the prescribed standard.

(c) The public utilities commission may provide incentives to encourage gas utility companies to exceed their renewable portfolio standards, meet their renewable portfolio standards before the prescribed dates, or both."

SECTION 3. Chapter 269, part V, Hawaii Revised Statutes, is amended by designating sections 269-91 to 269-96 as subpart A, entitled "Renewable Portfolio Standards for Electric Utility Companies".

SECTION 4. Section 269-91, Hawaii Revised Statutes, is amended to read as follows:

"269-91 [[]Definitions.[]] For the purposes of this [[part]:] subpart:

"Biofuels" means liquid or gaseous fuels produced from organic sources such as biomass crops, agricultural residues and oil crops, such as palm oil, canola oil, soybean oil, waste cooking oil, grease, and food wastes, animal residues and wastes, and sewage and landfill wastes.

"Cost-effective" means the ability to produce or purchase electric energy or firm capacity, or both, from renewable energy resources at or below avoided costs or as the public utilities commission otherwise determines to be just and reasonable consistent with the methodology set by the public utilities commission in accordance with section 269-27.2.

"Electric utility company" means a public utility as defined under section 269-1, for the production, conveyance, transmission, delivery, or furnishing of power.

"Grid-connected" means interconnected to the Hawaii electric system under an existing standard or rule approved by the public utilities commission. As used in this definition, "interconnection" has the same meaning as defined in section 269-141.

"Hawaii electric system" has the same meaning as defined in section 269-141.

"Renewable electrical energy" means:

(1) Electrical energy generated using renewable energy as the source, and beginning January 1, 2015, includes customer-sited, grid-connected renewable energy generation; and

(2) Electrical energy savings brought about by:

(A) The use of renewable displacement or off-set technologies, including solar water heating, sea-water air-conditioning district cooling systems, solar air-conditioning, and customer-sited, grid-connected renewable energy systems; provided that, beginning January 1, 2015, electrical energy savings shall not include customer-sited, grid-connected renewable-energy systems; or

(B) The use of energy efficiency technologies, including heat pump water heating, ice storage, ratepayer-funded energy efficiency programs, and use of rejected heat from co-generation and combined heat and power systems, excluding fossil-fueled qualifying facilities that sell electricity to electric utility companies and central station power projects.

"Renewable energy" means energy generated or produced using the following sources:

(1) Wind;

(2) The sun;

(3) Falling water;

(4) Biogas, including landfill and sewage-based digester gas;

(5) Geothermal;

(6) Ocean water, currents, and waves, including ocean thermal energy conversion;

(7) Biomass, including biomass crops, agricultural and animal residues and wastes, and municipal solid waste and other solid waste;

(8) Biofuels; [and] or

(9) Hydrogen produced from renewable energy sources.

"Renewable portfolio standard" means [the percentage of electrical energy sales that is represented by renewable electrical energy.] total renewable electrical energy generated from grid-connected renewable energy systems divided by total electrical energy generated from grid-connected energy systems, expressed as a percentage, but excluding electrical generation used exclusively for emergency services in the case that the normal supply from the Hawaii electric system fails."

SECTION 5. Section 269-92, Hawaii Revised Statutes, is amended to read as follows:

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

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

(2) Fifteen per cent [of its net electricity sales] by December 31, 2015;

(3) Thirty per cent [of its net electricity sales] by December 31, 2020;

(4) [Forty] Sixty-five per cent [of its net electricity sales] by December 31, 2030;

(5) [Seventy] Eighty-five per cent [of its net electricity sales] by December 31, 2040; and

(6) One hundred per cent [of its net electricity sales] by December 31, 2045.

(b) All electric grid-connected energy systems shall be one hundred per cent renewable energy systems by December 31, 2045; provided that generation that is used exclusively for emergency service in the event that the normal supply from the Hawaii electric system fails shall be excluded from the calculation as set forth in the definition of renewable portfolio standard in section 269-91.

[(b)] (c) The public utilities commission may establish standards for each electric utility company that prescribe [what] the portion of the renewable portfolio standards that shall be met by specific types of renewable energy resources; provided that:

(1) Prior to January 1, 2015, at least fifty per cent of the renewable portfolio standards shall be met by electrical energy generated using renewable energy as the source, and after December 31, 2014, the entire renewable portfolio standard shall be met by electrical generation from renewable energy sources;

(2) Beginning January 1, 2015, electrical energy savings shall not count toward renewable energy portfolio standards;

(3) Where electrical energy is generated or displaced by a combination of renewable and nonrenewable means, the proportion attributable to the renewable means shall be credited as renewable energy; and

(4) Where fossil and renewable fuels are co-fired in the same generating unit, the unit shall be considered to generate renewable electrical energy (electricity) in direct proportion to the percentage of the total heat input value represented by the heat input value of the renewable fuels.

[(c)] (d) If the public utilities commission determines that an electric utility company failed to meet the renewable portfolio standard, after a hearing in accordance with chapter 91, the utility shall be subject to penalties to be established by the public utilities commission; provided that if the commission determines that the electric utility company is unable to meet the renewable portfolio standards [due to] because of reasons beyond the reasonable control of an electric utility, as set forth in subsection (d), the commission, in its discretion, may waive in whole or in part any otherwise applicable penalties.

[(d)] (e) Events or circumstances that are [outside of] beyond an electric utility company's reasonable control may include, to the extent the event or circumstance could not be reasonably foreseen and ameliorated:

(1) Weather-related damage;

(2) Natural disasters;

(3) Mechanical or resource failure;

(4) Failure of renewable electrical energy producers to meet contractual obligations to the electric utility company;

(5) Labor strikes or lockouts;

(6) Actions of governmental authorities that adversely affect the generation, transmission, or distribution of renewable electrical energy under contract to an electric utility company;

(7) Inability to acquire sufficient renewable electrical energy due to lapsing of tax credits related to renewable energy development;

(8) Inability to obtain permits or land use approvals for renewable electrical energy projects;

(9) Inability to acquire sufficient cost-effective renewable electrical energy;

(10) Inability to acquire sufficient renewable electrical energy to meet the renewable portfolio standard goals beyond 2030 in a manner that is beneficial to Hawaii's economy in relation to comparable fossil fuel resources;

(11) Substantial limitations, restrictions, or prohibitions on utility renewable electrical energy projects; and

(12) Other events and circumstances of a similar nature[.] that could not be reasonably foreseen and ameliorated."

SECTION 6. Section 269-93, Hawaii Revised Statutes, is amended by amending its title to read as follows:

"269-93 Achieving electric portfolio standard."

SECTION 7. Section 269-94, Hawaii Revised Statutes, is amended to read as follows:

"[[]269-94 Waivers, extensions, and incentives[.]] for electric utility companies. Any electric utility company not meeting the renewable portfolio standard shall report to the public utilities commission within ninety days following the goal dates established in section [[]269-92[]], and provide an explanation for not meeting the renewable portfolio standard. The public utilities commission shall have the option to either grant a waiver from the renewable portfolio standard or an extension for meeting the prescribed standard.

The public utilities commission may provide incentives to encourage electric utility companies to exceed their renewable portfolio standards or to meet their renewable portfolio standards ahead of time, or both."

SECTION 8. Section 269-95, Hawaii Revised Statutes, is amended to read as follows:

"269-95 Renewable portfolio standards study[.] for electric utility companies. The public utilities commission shall:

(1) By December 31, 2007, develop and implement a utility ratemaking structure, which may include performance-based ratemaking, to provide incentives that encourage Hawaii's electric utility companies to use cost-effective renewable energy resources found in Hawaii to meet the renewable portfolio standards established in section 269-92, while allowing for deviation from the standards in the event that the standards cannot be met in a cost-effective manner or as a result of events or circumstances, such as described in section [269-92(d),] 269-92(e), beyond the control of the electric utility company that could not have been reasonably anticipated or ameliorated;

(2) Gather, review, and analyze empirical data to:

(A) Determine the extent to which any proposed utility ratemaking structure would impact electric utility companies' profit margins; and

(B) Ensure that the electric utility companies' opportunity to earn a fair rate of return is not diminished;

(3) Use funds from the public utilities special fund to contract with the Hawaii natural energy institute of the University of Hawaii to conduct independent studies to be reviewed by a panel of experts from entities such as the United States Department of Energy, National Renewable Energy Laboratory, Electric Power Research Institute, Hawaii electric utility companies, environmental groups, and other similar institutions with the required expertise. These studies shall include findings and recommendations regarding:

(A) The capability of Hawaii's electric utility companies to achieve renewable portfolio standards in a cost-effective manner and shall assess factors such as:

(i) The impact on consumer rates;

(ii) Utility system reliability and stability;

(iii) Costs and availability of appropriate renewable energy resources and technologies, including the impact of renewable portfolio standards, if any, on the energy prices offered by renewable energy developers;

(iv) Permitting approvals;

(v) Effects on the economy;

(vi) Balance of trade, culture, community, environment, land, and water;

(vii) Climate change policies;

(viii) Demographics;

(ix) Cost of fossil fuel volatility; and

(x) Other factors deemed appropriate by the commission; and

(B) Projected renewable portfolio standards to be set five and ten years beyond the then current standards;

(4) Evaluate the renewable portfolio standards every five years, beginning in 2013, and may revise the standards based on the best information available at the time to determine if the standards established by section 269‑92 remain effective and achievable; and

(5) Report its findings and revisions to the renewable portfolio standards, based on its own studies and other information, to the legislature no later than twenty days before the convening of the regular session of 2014, and every five years thereafter."

SECTION 9. Section 269-96, Hawaii Revised Statutes, is amended by amending its title to read as follows:

"[[]269-96[]] Energy-efficiency portfolio standards[.] for electric utility companies."

SECTION 10. In codifying the new subpart added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 11. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 12. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 13. This Act shall take effect upon its approval.

 

INTRODUCED BY:

_____________________________

 

 


 


 

Report Title:

Energy; Utilities; Gas; Electric; Renewable Portfolio Standard

 

Description:

Amends the definition of "renewable portfolio standard" to more accurately reflect the percentage of renewable energy use in the State. Establishes renewable portfolio standards and targets for gas utility companies that are similar to those set for electric utility companies.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.