Hawaii-2010-SB287-Amended

SECTION 1. Chapter 201N, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§201N- Geothermal energy pilot program. (a) Not later than July 1, 2009, the energy resources coordinator shall establish and implement a pilot program to:

(1) Develop new energy infrastructure necessary to maximize the production of electricity from geothermal energy sources;

(2) Modify or expand existing energy infrastructure to maximize the production of electricity from geothermal energy sources;

(3) Develop a sufficient workforce within the county to maximize production of electricity from geothermal energy sources; and

(4) Develop incentives that will encourage and facilitate the development of infrastructure for the deployment of renewable energy resources, including geothermal energy resources.

The pilot program shall terminate no later than December 31, 2019.

(b) The geothermal energy pilot program shall first be implemented in the county with the largest land mass in the State.

(c) The energy resources coordinator shall adopt rules pursuant to chapter 91 necessary for the purposes of this section."

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Geothermal energy pilot program tax credit. (a) There shall be allowed to each taxpayer subject to the taxes imposed by this chapter, an income tax credit which shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

(b) The amount of the credit shall be thirty per cent of the allowable construction, renovation, or workforce development costs incurred during the taxable year for each geothermal energy infrastructure project developed pursuant to section 201N- and located in the county with the largest contiguous land mass in the State.

(c) In case of a partnership, S corporation, estate, trust, or any commercial developer of a geothermal energy infrastructure project, the tax credit allowable is for construction or renovation costs incurred by the entity for the taxable year. The cost upon which the tax credit is computed shall be determined at the entity level. Distribution and share of credit shall be determined pursuant to section 235-110.7(a).

(d) If a deduction is taken under section 179 (with respect to election to expense depreciable business assets) of the Internal Revenue Code, section 611 (with respect to allowance of deduction for depletion) of the Internal Revenue Code, section 616 (with respect to development expenditures) of the Internal Revenue Code, or section 617 (with respect to deduction and recapture of certain mining exploration expenses) of the Internal Revenue Code, as applicable, no deduction shall be allowed for that portion of the construction or renovation cost for which the deduction is taken.

(e) The basis of eligible property for depreciation or accelerated cost recovery system purposes for state income taxes shall be reduced by the amount of credit allowable and claimed. In the alternative, the taxpayer shall treat the amount of the credit allowable and claimed as a taxable income item for the taxable year in which it is properly recognized under the method of accounting used to compute taxable income.

(f) The credit allowed under this section shall be claimed against the net income tax liability for the taxable year.

(g) If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of credit over liability may be carried forward until exhausted.

(h) The tax credit allowed under this section shall be available for taxable years beginning after December 31, 2008, and shall not be available for taxable years beginning after December 31, 2019.

(i) The director of taxation shall prepare such forms as may be necessary to claim a credit under this section, may require proof of the claim for the tax credit, and may adopt rules pursuant to chapter 91.

(j) All of the provisions relating to assessments and refunds under this chapter and under section 231-23(c)(1) shall apply to the tax credit under this section.

(k) Claims for the tax credit under this section, including any amended claims, shall be filed on or before the end of the twelfth month following the taxable year for which the credit may be claimed.

(l) As used in this section:

"Allowable construction, renovation, or workforce development costs" means the costs of building new geothermal energy infrastructure, modifying or expanding existing energy infrastructure, or developing a sufficient workforce for a geothermal energy infrastructure project as determined by the energy resource coordinator pursuant to section 201N- (b).

"Geothermal energy infrastructure project" means the development of new geothermal energy infrastructure, the modification or expansion of existing energy infrastructure, or the development of a sufficient workforce to maximize the use of geothermal energy sources undertaken pursuant to section 201N‑ ."

SECTION 3. Section 269-27.2, Hawaii Revised Statutes, is amended to read as follows:

"§269-27.2 Utilization of electricity generated from nonfossil fuels. (a) The public utilities commission shall investigate and determine the extent to which electricity generated from nonfossil fuel sources is available to public utilities that supply electricity to the public, which electricity is in excess of that utilized or otherwise needed by the producers for their internal uses and which the producers are willing to make available to the electric public utilities.

(b) The public utilities commission may direct public utilities that supply electricity to the public in the county with the largest contiguous land mass in the State to arrange for the acquisition of and to acquire electricity generated from geothermal sources at the maximum capacity that it is available from producers of geothermal energy. The public utilities commission shall direct public utilities that supply electricity to the public in the county with the largest contiguous land mass in the State to employ and dispatch the electricity generated from geothermal sources in a manner consistent with the availability thereof to maximize the reduction in fossil fuel consumption in the generation of electricity and to achieve energy self-sufficiency by no later than January 1, 2020.

To assist the energy resources coordinator in effectuating the purposes of chapter 201N, the public utilities commission shall develop reasonable guidelines and timetables for the creation and implementation of power purchase agreements.

[~~(b)~~] (c) The public utilities commission may direct public utilities that supply electricity to the public in any county that does not require maximum geothermal energy production as provided in subsection (b) to arrange for the acquisition of and to acquire electricity generated from nonfossil fuel sources as it is [~~available from and the producers are willing and able to make~~] available to the public utilities, and to employ and dispatch the nonfossil fuel generated electricity in a manner consistent with the availability thereof to maximize the reduction in consumption of fossil fuels in the generation of electricity to be provided to the public. To assist the energy resources coordinator in effectuating the purposes of chapter 201N, the public utilities commission may develop reasonable guidelines and timetables for the creation and implementation of power purchase agreements.

[~~(c)~~] (d) The rate payable by the public utility to the producer for the nonfossil fuel generated electricity supplied to the public utility shall be as agreed between the public utility and the supplier and as approved by the public utilities commission; provided that [~~in the event~~] if the public utility and the supplier fail to reach an agreement for a rate, the rate shall be as prescribed by the public utilities commission according to the powers and procedures provided in this chapter.

In the exercise of its authority to determine the just and reasonable rate for the nonfossil fuel generated electricity supplied to the public utility by the producer, the commission shall establish that the rate for purchase of electricity by a public utility shall not be more than one hundred per cent of the cost avoided by the utility when the utility purchases the electrical energy rather than producing the electrical energy.

The commission's determination of the just and reasonable rate shall be accomplished by establishing a methodology that removes or significantly reduces any linkage between the price of fossil fuels and the rate for the nonfossil fuel generated electricity to potentially enable utility customers to share in the benefits of fuel cost savings resulting from the use of nonfossil fuel generated electricity. As the commission deems appropriate, the just and reasonable rate for nonfossil fuel generated electricity supplied to the public utility by the producer may include mechanisms for reasonable and appropriate incremental adjustments, such as adjustments linked to consumer price indices for inflation or other acceptable adjustment mechanisms.

[~~(d)~~] (e) Upon application of a public utility that supplies electricity to the public, and notification [of] to its customers, the commission, after an evidentiary hearing, may allow payments made by the public utility to nonfossil fuel producers for firm capacity and related revenue taxes to be recovered by the public utility through an interim increase in rates until the effective date of the rate change approved by the commission's final decision in the public utility's next general rate proceeding under section 269-16, notwithstanding any requirements to the contrary of any other provision in this chapter or in the commission's rules or practices; provided the amount recovered by the utility and the amount of increase in rates due to the payments for firm capacity and related revenue taxes to be charged to the consumers of the electricity are found by the commission to be:

(1) Just and reasonable;

(2) Not unduly prejudicial to the customers of the public utility;

(3) Promotional of Hawaii's long-term objective of energy self-sufficiency;

(4) Encouraging to the maintenance or development of nonfossil fueled sources of electrical energy; and

(5) In the overall best interest of the general public.

The evidentiary hearing provided for in this subsection shall be conducted expeditiously and shall be limited to evidence related to the above findings. Notwithstanding section 269-16, no public hearing shall be required, except as the commission in its discretion may require."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 2009.

THE SENATE	S.B. NO.	287
TWENTY-FIFTH LEGISLATURE, 2009		S.D. 1
STATE OF HAWAII