Bill Text: HI HB1176 | 2012 | Regular Session | Amended
Bill Title: Renewable Energy; Transmission Cable
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Engrossed - Dead) 2011-12-01 - Carried over to 2012 Regular Session. [HB1176 Detail]
Download: Hawaii-2012-HB1176-Amended.html
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
1176 |
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TWENTY-SIXTH LEGISLATURE, 2011 |
H.D. 1 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO RENEWABLE ENERGY TRANSMISSION CABLE.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature hereby finds and declares that attaining independence from our detrimental reliance on fossil fuels has been a long-standing objective for the State. Hawaii is the state most dependent on petroleum for its energy needs. Reducing our oil dependence and the consequent price volatility and attaining energy security are critical.
Hawaii has an abundance of natural, renewable energy resources from wind, solar, ocean/wave, geothermal, and bio-based fuels, as well as opportunities to develop hydrogen options in the future. Hawaii's clean energy policy mandates and strongly promotes the use of these renewable energy resources.
Act 155, Session Law Hawaii 2009, codified as section 269-92, Hawaii Revised Statutes, increased the 2020 renewable portfolio standard (RPS) from twenty per cent to twenty-five per cent, and added a new forty per cent requirement for the year 2030. In addition, prior to January 1, 2015, fifty per cent of a utility's RPS needed to be met by electrical generation using renewable energy as the source, after January 1, 2015, an electric utility company's entire RPS will need to be met by renewable energy generation.
In addition, one of the key elements of Hawaii's energy policy concerns the desire for fixed-price indigenous renewable resources. Fixed price indigenous renewable resources are the best hedge against rising oil prices that could return to the $147 per barrel level experienced in 2008. In order for the State to meet its clean energy objectives, hundreds of megawatts of fixed price renewable energy must be developed in the near term. It is recognized, however, that no one single resource can provide the "silver bullet" solution as a hedge against oil price volatility.
To achieve these aggressive RPS goals, electric utility companies need to target technologies that:
(1) Are commercially available;
(2) Are capable of being developed within a near-term horizon;
(3) Are available on a large scale; and
(4) May be used to generate electricity delivered to Hawaii's load centers.
Two categories of technologies that currently fit this description are technologies that capture solar and wind resources. Estimates of solar and wind generation potentials in the State of Hawaii exceed the total electricity demand on all of the islands.
Electrical services on the islands of Oahu, Maui, Molokai, Lanai, and Hawaii currently are provided by affiliated, franchised electric utility companies, but none of the electric utility systems on these islands currently are electrically interconnected to the electric utility system on any other island.
By far, the island of Oahu has the largest demand for electricity and the largest concentration of the population base. Wind power is a commercially proven source of renewable energy today that, while limited on Oahu, is abundant on the neighbor islands of Lanai and Molokai. Lanai or Molokai wind projects totaling four hundred megawatts of capacity have the potential to produce in the range of one thousand five hundred gigawatt hours of energy annually given the expected capacity factors for large scale wind farms on these islands. To contribute to attaining RPS goals, strategies to link Oahu's demand to abundant on-island wind and solar resources as well as fixed-price wind from the neighbor islands of Molokai and Lanai are being pursued. Technical implementation and routing studies have been conducted that show that it is feasible to connect renewable generation facilities on Lanai or Molokai to the Oahu load using undersea high-voltage transmission cables.
The islands of Maui and Hawaii currently have significant as-available renewable resource penetration levels, based on projects that are currently in service or that have power purchase contracts. At the same time, they have significant potential as additional renewable resources. There are plans to consider the use of high-voltage undersea transmission cables to link the electric utility systems on these islands to the electric utility system on Oahu.
For several years the State, with the support and assistance of the federal government and Hawaiian Electric Company, has been exploring for several years the technical, engineering, economic, and financial feasibility of an interisland undersea electrical transmission cable system that would be capable of transmitting wind generated electric energy from Maui county to Oahu, and has concluded that an undersea cable system is both feasible and desirable.
In addition, economic analyses have shown that harnessing the wind resources for the islands appears to be a relatively cost-effective means for helping to meet Hawaii's energy policy objectives. The cost of the energy delivered to the load center is expected to be at or below the cost of other commercially available large scale renewable resources in the near-term and at or below the cost of petroleum-based generation in the longer-term. The capital cost of developing the high-voltage electric transmission cable systems is substantial in relationship to the electric utility companies' existing rate bases, however; and it is expected that undersea transmission cables will be installed by a non-utility investor that assumes financial responsibility for the project until it achieves commercial availability.
Accordingly, the purpose of this Act is to establish the regulatory structure under which inter-island undersea transmission cables could be developed, financed, and constructed on commercially reasonable terms, such as those upon which successful cable projects have been undertaken in New York, California, and around the world.
The legislature also understands that the development of large-scale renewable energy projects will impact the communities on which the projects are located, and that at least some of the environmental review processes conducted as part of the permitting process for the projects will occur after the public utilities commission would need to act on a cable certification application. To foster communication with the affected communities and the commission, the legislature has incorporated a requirement that the public utilities commission hold a public hearing on each island connected by the high-voltage electric transmission cable system for the purposes of obtaining comments and input from interested parties.
To interconnect undersea high-voltage transmission cables to an electric utility system, the electric utility company will need to install on-island transmission infrastructure. In addition, because of the fixed costs of renewable energy projects relative to the variable costs of fossil fuel generation, it is expected that electric utility ratepayers may benefit if the electric utility company acquires the undersea high-voltage transmission cables at the commencement of commercial operations, or at some point in time after the commencement of commercial operations. Given the cost of the on-island transmission infrastructure, the need to have the on-island infrastructure available when the undersea high-voltage transmission cables commence commercial operations, and the potential acquisition cost of the undersea high-voltage transmission cables, the electric utility's credit quality, which is essential to the development of renewable energy resources in Hawaii, may be negatively impacted unless specified cost recovery provisions are added to the public utility law.
SECTION 2. Chapter 269, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:
"PART . INTERISLAND TRANSMISSION SYSTEM
§269-A Definitions. As used in this part:
"Cable company" means any person who are selected through an Request For Proposal to be an applicant to be a certified cable company.
"Cable purchase contract" means a contract to purchase a high-voltage electric transmission cable system after a specified period of commercial operations in accordance with an option to purchase acquired pursuant to a Request For Proposal, or included in a power purchase agreement.
"Certified cable company" means any person who owns or controls a high-voltage electric transmission cable system, provided that the person receives a certificate of public convenience and necessity from the commission pursuant to section 269-B.
"Commercial operations" means the period after the high-voltage electric transmission cable system passes acceptance tests resulting from the Request For Proposal, as determined by a qualified independent engineer approved by the commission and other criteria the commission determines as reasonable.
"Commission" means the public utilities commission established pursuant to section 269-2.
"Cost" means all capital investments, including rate of return, any applicable taxes, and all expenses, including capacity payments and operation and maintenance expenses, related to or resulting from the planning, licensing, permitting, designing, development, construction, or operation of a high-voltage electric transmission cable system.
"Development period" means the period of time after the certified transmission entity has been granted a certificate of public convenience and necessity, but before commercial operations.
"Electric utility company" means a public utility as defined under section 269-1, for the production, conveyance, transmission, delivery, or furnishing of electric power.
"Electric utility system" means the electric system owned and operated by an electric utility company, including any non-utility owned facilities that are interconnected to the system, consisting of power plants, transmission and distribution lines, and related equipment for the production and delivery of electric power to the public.
"High-voltage electric transmission cable system" means a one hundred twenty kilovolt or greater electric transmission alternating current (AC) or direct current (DC) transmission cables constructed undersea, including connected transmission cable or cables or lines installed on land, connecting the electric utility systems on two or more islands or allowing for the transmission of power from one or more renewable generation facilities to the electric utility system located on another island, AC substations, or AC/DC converter stations, fiber optic communication cables, and other appurtenant facilities.
"On-island transmission infrastructure" means the modifications and additions to the existing alternating current (AC) transmission grid on an island and other electric utility system modifications needed to reliably interconnect a high-voltage electric transmission cable system to an electric utility system, and to reliably accept power generated from large-scale renewable generation facilities transmitted via the high-voltage electric transmission cable system.
"Predevelopment period" means the period of time before the certified transmission entity has been granted a certificate of public convenience and necessity.
"Renewable electricity" means electrical energy generated using renewable energy as the source.
"Renewable energy" has the same meaning as in section 269-91.
"Renewable generation facility" means a facility generating electrical energy using renewable energy as the primary source.
"Renewable portfolio standard" has the same meaning as in section 269-91.
"Request For Proposal" means a request issued pursuant to a competitive bidding process authorized by the commission to select a certified cable company, and conducted by the electric utility company or companies to which the capacity of a high-voltage electric transmission cable system will be made available, with the participation and assistance of the State.
"Turnkey cable contract" means a contract entered into pursuant to a Request For Proposal, under which a cable company designs, builds, and transfers a high-voltage electric transmission cable system to an electric utility company upon achievement of commercial operations.
§269-B Certification. Prior to installing a high-voltage electric transmission cable system, a cable company shall be certified by having been issued a certificate of public convenience and necessity by the commission pursuant to section 269-7.5. Notwithstanding any provision of section 269-7.5 to the contrary:
(1) In any application for a certificate of public convenience and necessity for a high-voltage electric transmission cable system, the commission shall issue a final order within one hundred eighty days after the application is filed, provided that the commission may extend the timeline as necessary;
(2) The fitness of the cable company shall be determined through an Request For Proposal;
(3) In determining whether the applicant is financially fit, the commission shall allow for the use of commercially reasonable non-recourse project financing for the high-voltage electric transmission cable system;
(4) In determining whether the proposed transmission capacity service is, or will be, required by the present or future public convenience and necessity, the commission shall determine whether the high-voltage electric transmission cable system would be a cost effective means of:
(A) Interconnecting two or more electric utility systems; or
(B) Helping one or more electric utility companies meet the applicable renewable portfolio standard;
(5) If the primary source of the renewable electricity that will be transmitted to an electric utility company or companies using the high-voltage electric transmission cable system will be provided pursuant to a power purchase agreement between an electric utility company and an owner of a new renewable generation facility, the commission shall take into account the status of the power purchase agreement in reviewing and approving the application for certification;
(6) In the certification process, the commission shall review and determine ratemaking principles appropriate for this type of project that would be applicable with respect to the high-voltage electric transmission cable system during commercial operations. In determining the authorized rate of return for the certified cable company, the commission shall take into account the risks assumed by a certified cable company during the predevelopment, development, and commercial operations periods related to the development, financing, construction, and operation of the high-voltage electric transmission cable system; and
(7) Prior to approving the application for certification, the commission shall hold a public hearing on each island connected by the high-voltage electric transmission cable system for the purposes of obtaining comments and input from the affected communities about the high-voltage electric transmission cable system.
§269-C Transmission tariff. The commission shall approve by order the tariff of the certified cable company. Thereafter, the certified cable company shall make the capacity of its high-voltage electric transmission cable system available to the electric utility company or companies. The tariff shall be consistent with the tariff provisions resulting from the Request For Proposal. The certified cable company may submit its proposed tariff for approval prior to the expected commercial operations date, and the commission shall take final action on the proposed tariff within one hundred twenty days after submittal of the proposed tariff with any supporting documentation as may be required by the commission; provided the commission may extend the timeline as necessary.
§269-D Surcharge mechanism. (a) The commission shall establish a surcharge mechanism to allow recovery of the high-voltage electric transmission cable system costs designated for recovery according to the ratemaking principles determined by the commission pursuant to section 269-B.
(b) Pursuant to the tariff described in this part, the commission shall designate by order, the electric utility company or companies, to which the capacity of the high-voltage electric transmission cable system is made available as the agent of the certified cable company to collect the surcharge approved by the commission. The electric utility company collecting moneys for the benefit of the certified cable company shall have no right, title, or interest in such moneys. The commission shall approve the fee to be collected by the electric utility company through the same surcharge for acting as the collection agent for the certified cable company.
(c) Notwithstanding any requirements to the contrary or any other provision in this chapter, a high-voltage electric transmission cable system shall be deemed "used or useful for public utility purposes" upon achieving commercial operations.
§269-E Electric utility company acquisition of cable system. (a) The commission may approve an electric utility company's acquisition of a high-voltage electric transmission cable system pursuant to a commission-approved turnkey cable contract or a cable purchase contract.
(b) In the case of a turnkey cable contract, the commission shall review and approve, disapprove, or approve subject to conditions, the contract upon application filed by the electric utility company at the conclusion of the Request For Proposal.
(c) In the case of a cable purchase contract, the commission shall review and approve, disapprove, or approve subject to conditions, the option to purchase in the proceeding in which the commission also reviews and approves an application for a certificate of public convenience and necessity for a cable company providing the option to purchase, or a power purchase agreement containing the option to purchase. The commission shall review and approve, disapprove, or approve subject to conditions, the cable purchase contract resulting from exercise of the option to purchase upon an application filed by the electric utility company proposing to acquire the high-voltage electric transmission cable system.
§269-F Recovery of electric utility company capital costs. (a) An electric utility company shall be entitled to recover the company's revenue requirement resulting from the costs that the company prudently incurs in acquiring a high-voltage electric transmission cable system throughout the commercial operations period after the high voltage electric transmission cable system is acquired, provided that the acquisition is made in accordance with a turnkey cable contract or cable purchase contract approved by the commission.
(b) An electric utility company shall be entitled to recover, through an automatic adjustment clause, the company's revenue requirement resulting from the capital costs that the company prudently incurs for on-island transmission infrastructure; provided that the commission has approved the electric utility company's commitment of capital expenditure costs for the project.
(c) To provide for timely recovery of the revenue requirement, the commission shall establish a separate automatic adjustment clause, as defined in section 269-16, or modify an existing automatic adjustment clause. The use of the automatic adjustment clause to recover the revenue requirement shall be allowed to continue until the revenue requirement is incorporated in rates in an electric utility company's rate case.
(d) The electric utility company's revenue requirement includes:
(1) The allowed rate of return, as set in the electric utility company's last rate case, on the electric utility company's net investment in the high-voltage electric transmission cable system from the acquisition date of the high-voltage electric transmission cable system, and in the on-island transmission infrastructure from the date the on-island transmission infrastructure is completed and available for service;
(2) Depreciation; and
(3) Revenue taxes and other relevant costs as approved by the commission.
(e) The electric utility company's net investment includes the cable acquisition cost in the case of the high-voltage electric transmission cable system and the costs of planning, permitting, and constructing the on-island transmission infrastructure, including an allowance for funds used during construction when the utility finances the planning, permitting, and construction costs, less accumulated depreciation and associated unamortized deferred income taxes.
(f) Notwithstanding any requirements to the contrary or any other provision in this chapter, if the on-island transmission infrastructure is found to be necessary or appropriate to facilitate achievement of the State's renewable portfolio standards in a proceeding for approval of a commitment of capital expenditure costs for the project, no finding of used or useful under section 269-16(b)(3) shall be required for the electric utility company to recover its revenue requirement under subsection (b).
(g) If the electric utility company elects not to complete the on-island transmission infrastructure, and the commission approves this election, or if the electric utility company is precluded from completing construction of the on-island transmission infrastructure, the electric utility company shall be allowed to recover all reasonable costs prudently incurred during the predevelopment and development periods. The electric utility company shall recover these costs through the surcharge mechanism over a period equal to the period during which the costs were incurred or five years, whichever is greater."
SECTION 3. Chapter 239, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§239- Surcharge amounts exempt. Amounts received in the form of a surcharge by an electric utility company acting on behalf of a certified cable company under section 269-D shall not be gross income for the electric utility company for purposes of this chapter. Any amounts retained by the electric utility company for collection or other costs shall not be included in this exemption."
SECTION 4. Chapter 240, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§240- Surcharge amounts exempt. Amounts received in the form of a surcharge by an electric utility company acting on behalf of an affected certified cable company under section 269-D shall not be gross receipts for the electric utility company for purposes of this chapter. Any amounts retained by the electric utility company for collection or other costs shall not be included in this exemption."
SECTION 5. Section 235-7, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) There shall be excluded from gross income, adjusted gross income, and taxable income:
(1) Income not subject to taxation by the State under the Constitution and laws of the United States;
(2) Rights, benefits, and other income exempted from taxation by section 88-91, having to do with the state retirement system, and the rights, benefits, and other income, comparable to the rights, benefits, and other income exempted by section 88-91, under any other public retirement system;
(3) Any compensation received in the form of a pension for past services;
(4) Compensation paid to a patient affected with Hansen's disease employed by the State or the United States in any hospital, settlement, or place for the treatment of Hansen's disease;
(5) Except as otherwise expressly provided, payments made by the United States or this State, under an act of Congress or a law of this State, which by express provision or administrative regulation or interpretation are exempt from both the normal and surtaxes of the United States, even though not so exempted by the Internal Revenue Code itself;
(6) Any income expressly exempted or excluded from the measure of the tax imposed by this chapter by any other law of the State, it being the intent of this chapter not to repeal or supersede any express exemption or exclusion;
(7) Income received by each member of the reserve components of the Army, Navy, Air Force, Marine Corps, or Coast Guard of the United States of America, and the Hawaii national guard as compensation for performance of duty, equivalent to pay received for forty-eight drills (equivalent of twelve weekends) and fifteen days of annual duty, at an:
(A) E-1 pay grade after eight years of service; provided that this subparagraph shall apply to taxable years beginning after December 31, 2004;
(B) E-2 pay grade after eight years of service; provided that this subparagraph shall apply to taxable years beginning after December 31, 2005
(C) E-3 pay grade after eight years of service; provided that this subparagraph shall apply to taxable years beginning after December 31, 2006;
(D) E-4 pay grade after eight years of service; provided that this subparagraph shall apply to taxable years beginning after December 31, 2007; and
(E) E-5 pay grade after eight years of service; provided that this subparagraph shall apply to taxable years beginning after December 31, 2008;
(8) Income derived from the operation of ships or aircraft if the income is exempt under the Internal Revenue Code pursuant to the provisions of an income tax treaty or agreement entered into by and between the United States and a foreign country; provided that the tax laws of the local governments of that country reciprocally exempt from the application of all of their net income taxes, the income derived from the operation of ships or aircraft that are documented or registered under the laws of the United States;
(9) The value of legal services provided by a prepaid legal service plan to a taxpayer, the taxpayer's spouse, and the taxpayer's dependents;
(10) Amounts paid, directly or indirectly, by a prepaid legal service plan to a taxpayer as payment or reimbursement for the provision of legal services to the taxpayer, the taxpayer's spouse, and the taxpayer's dependents;
(11) Contributions by an employer to a prepaid legal service plan for compensation (through insurance or otherwise) to the employer's employees for the costs of legal services incurred by the employer's employees, their spouses, and their dependents;
(12) Amounts received in the form of a monthly
surcharge by a utility acting on behalf of an affected utility under section
269-16.3 shall not be gross income, adjusted gross income, or taxable income
for the acting utility under this chapter. Any amounts retained by the acting
utility for collection or other costs shall not be included in this exemption;
[and]
(13) One hundred per cent of the gain realized by a fee simple owner from the sale of a leased fee interest in units within a condominium project, cooperative project, or planned unit development to the association of owners under chapter 514A or 514B, or the residential cooperative corporation of the leasehold units.
For purposes of this paragraph:
"Condominium project" and "cooperative project" shall have the same meanings as provided under section 514C-1;
"Fee simple owner" shall have the same meaning as provided under section 516-1; provided that it shall include legal and equitable owners;
"Legal and equitable owner", and "leased fee interest" shall have the same meanings as provided under section 516-1; and
["Condominium project"
and "cooperative project" shall have the same meanings
as provided under section 514C-1.]
(14) Amounts received in the form of a monthly surcharge by an electric utility company acting on behalf of a certified cable company under section 269-D. Any amounts retained by the electric utility company for collection or other costs shall not be included in this exemption."
SECTION 6. Section 269-30, Hawaii Revised Statutes, is amended to read as follows:
"§269-30 Finances; public utility fee. (a) Sections 607-5 to 607-9 shall apply to the public utilities commission and each commissioner, as well as to the supreme and circuit courts, and all costs and fees paid or collected pursuant to this section shall be deposited with the director of finance to the credit of the public utilities commission special fund established under section 269-33.
(b) There also shall be paid to the public utilities commission in each of the months of July and December of each year, by each public utility subject to investigation by the public utilities commission, a fee equal to one-fourth of one per cent of the gross income from the public utility's business during the preceding year, or the sum of $30, whichever is greater. This fee shall be deposited with the director of finance to the credit of the public utilities commission special fund.
(c) Each public utility paying a fee under subsection (b) may impose a surcharge to recover the amount paid above one-eighth of one per cent of gross income. The surcharge imposed shall not be subject to the notice, hearing, and approval requirements of this chapter; provided that the surcharge may be imposed by the utility only after thirty days' notice to the public utilities commission. Unless ordered by the public utilities commission, the surcharge shall be imposed only until the conclusion of the public utility's next rate case; provided that the surcharge shall be subject to refund with interest at the public utility's authorized rate of return on rate base if the utility collects more money from the surcharge than actually paid due to the increase in the fee to one-fourth of one per cent.
(d) Notwithstanding any provision of this chapter to the contrary, the public utilities commission may, upon the filing of a petition by a public utility, credit a public utility for amounts paid under subsection (b) toward amounts the public utility owes in one call center fees under section 269E-6(f).
(e) Amounts received in the form of a surcharge by an electric utility company acting on behalf of a certified cable company under section 269-D shall not be gross income for the acting electric utility company for purposes of this section. Any amounts retained by the electric utility company for collection or other costs shall not be included in this exemption."
SECTION 7. In codifying the new sections 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 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 9. This Act shall take effect on July 1, 2011.
Report Title:
Renewable Energy; Transmission Cable
Description:
Establishes the regulatory structure under which inter-island undersea energy transmission cables could be commercially developed, financed, and constructed. (HB1176 HD1)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
