Bill Text: HI HB759 | 2014 | Regular Session | Introduced

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Bill Title: Electric Public Utilities; Operations; Rates; Energy Sources

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2013-12-18 - Carried over to 2014 Regular Session. [HB759 Detail]

Download: Hawaii-2014-HB759-Introduced.html

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HOUSE OF REPRESENTATIVES	H.B. NO.	759
TWENTY-SEVENTH LEGISLATURE, 2013
STATE OF HAWAII

A BILL FOR AN ACT

 

 

relating to public utilities.

 

 

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

 

     SECTION 1.  The legislature finds that the State's renewable energy goals for electricity cannot be achieved by the current regulated but market-driven mixed public utility organization.  The current organization relies heavily upon fossil fuel-based power plants that are lightly complemented by independently produced renewable energy acquired under a market driven request for proposal and power purchase agreement process.  Oversight of acquisition and transmission costs is handled by the public utilities commission using a classic rate case model.  The legislature also finds that this organization requires the public utilities commission to work with multiple public utility companies to share renewable energy technologies and human resources while processing multiple rate tariffs and engaging in other duplicative efforts that delay and inhibit the Hawaii clean energy initiative.  Existing statutes that allow the utilities to merge renewable portfolio standards and share renewable energy costs add complexity to the management process.  These statutes create a virtual single electric utility between counties.

     It has been clearly documented that the city and county of Honolulu, with its large population base, has the highest demand for electricity.  It has also been clearly documented that Maui and Hawaii counties have far greater wind and geothermal resources for the generation of electricity.  The existing organization of multiple county-based public utilities that supply electricity does not facilitate a shared or distributed use of renewable electricity.  The legislature further finds that this Act will facilitate the development of excess renewable electric energy from counties with small populations for utilization by counties with larger populations.

     The legislature further finds that the State needs a single electricity development plan and supporting organization because the one hundred year old county-based public utility organizations will not support our future.  For more than twenty-four years, the State has recognized that development of geothermal energy and a cable system should be a priority, as evidenced by chapter 196D, Hawaii Revised Statutes.  Further, wind and photovoltaic energy is intermittent and would provide only twenty to thirty per cent of the State's energy needs in the future.  The State must focus on identifying and developing the remaining necessary firm renewable energy resources to meet our electricity needs.

     The legislature further finds that a new electric utility organization model should be focused on transmission, delivery, network reliability, and lowest cost modeling.  The prioritization of lower cost renewable electricity over fossil fuel-based electricity must be a key component of the new system.  Energy sources and electricity production costs of all power plants should be clearly identified to facilitate decisions on whether to curtail or retire those plants.

     The purpose of this Act is to facilitate the transition from fossil fuel-based energy to renewable energy for production, distribution, and management of electricity to stabilize or reduce electricity costs over time.

     SECTION 2.  Chapter 269, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:

     "§269-    Electric utility companies; limitation.  (a)  Notwithstanding any other law to the contrary, no electric utility company shall own or operate both the means of producing electricity and the means of conveying, transmitting, delivering, or furnishing electricity to the public.

     (b)  For purposes of this section, "electric utility company" shall have the same meaning as in section 269-91.

     (c)  This section shall not apply to an electric utility company exempt from federal taxes under section 501(c)(12) of the Internal Revenue Code.

     §269-    Power purchase agreements; prohibited with affiliates.  (a)  Notwithstanding any other law to the contrary, any electric utility company shall acquire the electricity it provides to the public through a power purchase agreement.

     (b)  No electric utility company shall enter into a power purchase agreement with any affiliated interest.

     (c)  The rate payable by the electric utility company to the producer for the generated electricity supplied to the electric utility company shall be as agreed upon between the electric utility company and the producer and as approved by the public utilities commission; provided that if the electric utility company and the producer 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.

     (d)  For the purposes of this section, unless the context requires otherwise:

     "Affiliated interests" means the same as defined under section 269-19.5.

     "Electric utility company" means the same as in section 269-91.

     "Power purchase agreement" means an agreement between an owner of any facility that produces electricity and an electric utility company for the sale of electricity produced by the facility to the electric utility company.

     (e)  This section shall not apply to an electric utility company exempt from federal taxes under section 501(c)(12) of the Internal Revenue Code."

     SECTION 3.  Section 269-1, Hawaii Revised Statutes, is amended by amending the definition of "public utility" to read as follows:

     ""Public utility":

     (1)  Includes every person who may own, control, operate, or manage as owner, lessee, trustee, receiver, or otherwise, whether under a franchise, charter, license, articles of association, or otherwise, any plant or equipment, or any part thereof, directly or indirectly for public use for the transportation of passengers or freight; for the conveyance or transmission of telecommunications messages; for the furnishing of facilities for the transmission of intelligence by electricity within the State or between points within the State by land, water, or air; for the [production,] conveyance, transmission, delivery, or furnishing of light, power, heat, cold, water, gas, or oil; for the storage or warehousing of goods; or for the disposal of sewage; provided that the term shall include:

          (A)  An owner or operator of a private sewer company or sewer facility; and

          (B)  A telecommunications carrier or telecommunications common carrier; and

     (2)  Shall not include:

         (A)  An owner or operator of an aerial transportation enterprise;

          (B)  An owner or operator of a taxicab as defined in this section;

          (C)  Common carriers that transport only freight on the public highways, unless operating within localities, along routes, or between points that the public utilities commission finds to be inadequately serviced without regulation under this chapter;

          (D)  Persons engaged in the business of warehousing or storage unless the commission finds that regulation is necessary in the public interest;

         (E)  A carrier by water to the extent that the carrier enters into private contracts for towage, salvage, hauling, or carriage between points within the State; provided that the towing, salvage, hauling, or carriage is not pursuant to either an established schedule or an undertaking to perform carriage services on behalf of the public generally;

         (F)  A carrier by water, substantially engaged in interstate or foreign commerce, that transports passengers on luxury cruises between points within the State or on luxury round-trip cruises returning to the point of departure;

          (G)  Any person who:

              (i)  Controls, operates, or manages plants or facilities for the production, transmission, or furnishing of power primarily or entirely from nonfossil fuel sources; and

             (ii)  Provides, sells, or transmits all of that power, except as is used in its own internal operations, directly to a public utility for transmission to the public;

         (H)  A telecommunications provider only to the extent determined by the public utilities commission pursuant to section 269-16.9;

          (I)  Any person who controls, operates, or manages plants or facilities developed pursuant to chapter 167 for conveying, distributing, and transmitting water for irrigation and other purposes for public use and purpose;

          (J)  Any person who owns, controls, operates, or manages plants or facilities for the reclamation of wastewater; provided that:

              (i)  The services of the facility are provided pursuant to a service contract between the person and a state or county agency and at least ten per cent of the wastewater processed is used directly by the state or county agency that entered into the service contract;

             (ii)  The primary function of the facility is the processing of secondary treated wastewater that has been produced by a municipal wastewater treatment facility owned by a state or county agency;

            (iii)  The facility does not make sales of water to residential customers;

             (iv)  The facility may distribute and sell recycled or reclaimed water to entities not covered by a state or county service contract; provided that, in the absence of regulatory oversight and direct competition, the distribution and sale of recycled or reclaimed water shall be voluntary and its pricing fair and reasonable.  For purposes of this subparagraph, "recycled water" and "reclaimed water" means treated wastewater that by design is intended or used for a beneficial purpose; and

              (v)  The facility is not engaged, either directly or indirectly, in the processing of food wastes;

         (K)  Any person who owns, controls, operates, or manages any seawater air conditioning district cooling project; provided that at least fifty per cent of the energy required for the seawater air conditioning district cooling system is provided by a renewable energy resource, such as cold, deep seawater;

         (L)  Any person who owns, controls, operates, or manages plants or facilities primarily used to charge or discharge a vehicle battery that provides power for vehicle propulsion; and

         (M)  Any person who:

              (i)  Owns, controls, operates, or manages a renewable energy system that is located on a customer's property; and

             (ii)  Provides, sells, or transmits the power generated from that renewable energy system to an electric utility or to the customer on whose property the renewable energy system is located; provided that, for purposes of this clause, a customer's property shall include all contiguous property owned or leased by the customer without regard to interruptions in contiguity caused by easements, public thoroughfares, transportation rights-of-way, and utility rights-of-way.

     If the application of this chapter is ordered by the commission in any case provided in paragraphs (2)(C), (2)(D), (2)(H), and (2)(I), the business of any public utility that presents evidence of bona fide operation on the date of the commencement of the proceedings resulting in the order shall be presumed to be necessary to the public convenience and necessity, but any certificate issued under this proviso shall nevertheless be subject to terms and conditions as the public utilities commission may prescribe, as provided in sections 269-16.9 and 269-20."

     SECTION 4.  Section 269-16, Hawaii Revised Statutes, is amended to read as follows:

     "§269-16  Regulation of utility rates; ratemaking procedures.  (a)  All rates, fares, charges, classifications, schedules, rules, and practices made, charged, or observed by any public utility or by two or more public utilities jointly shall be just and reasonable and shall be filed with the public utilities commission.  The rates, fares, classifications, charges, and rules of every public utility shall be published by the public utility in such manner as the public utilities commission may require, and copies shall be furnished to any person on request.

     To the extent the contested case proceedings referred to in chapter 91 are required in any rate proceeding to ensure fairness and to provide due process to parties that may be affected by rates approved by the commission, the evidentiary hearings shall be conducted expeditiously and shall be conducted as a part of the ratemaking proceeding.

     (b)  No rate, fare, charge, classification, schedule, rule, or practice, other than one established pursuant to an automatic rate adjustment clause previously approved by the commission, shall be established, abandoned, modified, or departed from by any public utility, except after thirty days' notice to the commission as prescribed in section 269-12(b), and prior approval by the commission for any increases in rates, fares, or charges.  The commission, in its discretion and for good cause shown, may allow any rate, fare, charge, classification, schedule, rule, or practice to be established, abandoned, modified, or departed from upon notice less than that provided for in section 269-12(b).  A contested case hearing shall be held in connection with any increase in rates, and the hearing shall be preceded by a public hearing as prescribed in section 269-12(c), at which the consumers or patrons of the public utility may present testimony to the commission concerning the increase.  The commission, upon notice to the public utility, may:

     (1)  Suspend the operation of all or any part of the proposed rate, fare, charge, classification, schedule, rule, or practice or any proposed abandonment or modification thereof or departure therefrom;

     (2)  After a hearing, by order:

         (A)  Regulate, fix, and change all such rates, fares, charges, classifications, schedules, rules, and practices so that the same shall be just and reasonable;

         (B)  Prohibit rebates and unreasonable discrimination between localities or between users or consumers under substantially similar conditions;

         (C)  Regulate the manner in which the property of every public utility is operated with reference to the safety and accommodation of the public;

         (D)  Prescribe its form and method of keeping accounts, books, and records, and its accounting system;

         (E)  Regulate the return upon its public utility property;

         (F)  Regulate the incurring of indebtedness relating to its public utility business; and

         (G)  Regulate its financial transactions; and

     (3)  Do all things that are necessary and in the exercise of the commission's power and jurisdiction, all of which as so ordered, regulated, fixed, and changed are just and reasonable, and provide a fair return on the property of the utility actually used or useful for public utility purposes.

     (c)  The commission may in its discretion, after public hearing and upon showing by a public utility of probable entitlement and financial need, authorize temporary increases in rates, fares, and charges; provided that the commission shall require by order the public utility to return, in the form of an adjustment to rates, fares, or charges to be billed in the future, any amounts with interest, at a rate equal to the rate of return on the public utility's rate base found to be reasonable by the commission, received by reason of continued operation that are in excess of the rates, fares, or charges finally determined to be just and reasonable by the commission.  Interest on any excess shall commence as of the date that any rate, fare, or charge goes into effect that results in the excess and shall continue to accrue on the balance of the excess until returned.

     (d)  The commission shall make every effort to complete its deliberations and issue its decision as expeditiously as possible and before nine months from the date the public utility filed its completed application; provided that in carrying out this mandate, the commission shall require all parties to a proceeding to comply strictly with procedural time schedules that it establishes.  If a decision is rendered after the nine-month period, the commission shall report in writing the reasons therefor to the legislature within thirty days after rendering the decision.

     Notwithstanding subsection (c), if the commission has not issued its final decision on a public utility's rate application within the nine-month period stated in this section, the commission, within one month after the expiration of the nine-month period, shall render an interim decision allowing the increase in rates, fares and charges, if any, to which the commission, based on the evidentiary record before it, believes the public utility is probably entitled.  The commission may postpone its interim rate decision for thirty days if the commission considers the evidentiary hearings incomplete.  In the event interim rates are made effective, the commission shall require by order the public utility to return, in the form of an adjustment to rates, fares, or charges to be billed in the future, any amounts with interest, at a rate equal to the rate of return on the public utility's rate base found to be reasonable by the commission, received under the interim rates that are in excess of the rates, fares, or charges finally determined to be just and reasonable by the commission.  Interest on any excess shall commence as of the date that any rate, fare, or charge goes into effect that results in the excess and shall continue to accrue on the balance of the excess until returned.

     The nine-month period in this subsection shall begin only after a completed application has been filed with the commission and a copy served on the consumer advocate.  The commission shall establish standards concerning the data required to be set forth in the application in order for it to be deemed a completed application.  The consumer advocate may, within twenty-one days after receipt, object to the sufficiency of any application, and the commission shall hear and determine any objection within twenty-one days after it is filed.  If the commission finds that the objections are without merit, the application shall be deemed to have been completed upon original filing.  If the commission finds the application to be incomplete, it shall require the applicant to submit an amended application consistent with its findings, and the nine-month period shall not commence until the amended application is filed.

     (e)  In any case of two or more organizations, trades, or businesses (whether or not incorporated, whether or not organized in the State of Hawaii, and whether or not affiliated) owned or controlled directly or indirectly by the same interests, the commission may distribute, apportion, or allocate gross income, deductions, credits, or allowances between or among the organizations, trades, or businesses, if it determines that the distribution, apportionment, or allocation is necessary to adequately reflect the income of any such organizations, trades, or businesses to carry out the regulatory duties imposed by this section.

     (f)  Notwithstanding any law to the contrary, for public utilities having annual gross revenues of less than $2,000,000, the commission may make and amend its rules and procedures to provide the commission with sufficient facts necessary to determine the reasonableness of the proposed rates without unduly burdening the utility company and its customers.  In the determination of the reasonableness of the proposed rates, the commission shall:

     (1)  Require the filing of a standard form application to be developed by the commission.  The standard form application for general rate increases shall describe the specific facts that shall be submitted to support a determination of the reasonableness of the proposed rates, and require the submission of financial information in conformance with a standard chart of accounts to be approved by the commission, and other commission guidelines to allow expeditious review of a requested general rate increase application;

     (2)  Hold a public hearing as prescribed in section 269‑12(c) at which the consumers or patrons of the public utility may present testimony to the commission concerning the increase.  The public hearing shall be preceded by proper notice, as prescribed in section 269‑12; and

     (3)  Make every effort to complete its deliberations and issue a proposed decision and order within six months from the date the public utility files a completed application with the commission; provided that all parties to the proceeding strictly comply with the procedural schedule established by the commission and no person is permitted to intervene.  If a proposed decision and order is rendered after the six-month period, the commission shall report in writing the reasons therefor to the legislature within thirty days after rendering the proposed decision and order.  Prior to the issuance of the commission's proposed decision and order, the parties shall not be entitled to a contested case hearing.

              If all parties to the proceeding accept the proposed decision and order, the parties shall not be entitled to a contested case hearing, and section 269‑15.5 shall not apply.  If the commission permits a person to intervene, the six‑month period shall not apply and the commission shall make every effort to complete its deliberations and issue its decision within the nine‑month period from the date the public utility's completed application was filed, pursuant to subsections (b), (c), and (d).

              If a party does not accept the proposed decision and order, either in whole or in part, that party shall give notice of its objection or nonacceptance within the timeframe prescribed by the commission in the proposed decision and order, setting forth the basis for its objection or nonacceptance; provided that the proposed decision and order shall have no force or effect pending the commission's final decision.  If notice is filed, the above six‑month period shall not apply and the commission shall make every effort to complete its deliberations and issue its decision within the nine‑month period from the date the public utility's completed application was filed as set forth in subsection (d).  Any party that does not accept the proposed decision and order under this paragraph shall be entitled to a contested case hearing; provided that the parties to the proceeding may waive the contested case hearing.

     Public utilities subject to this subsection shall follow the standard chart of accounts to be approved by the commission for financial reporting purposes.  The public utilities shall file a certified copy of the annual financial statements in addition to an updated chart of accounts used to maintain their financial records with the commission and consumer advocate within ninety days from the end of each calendar or fiscal year, as applicable, unless this timeframe is extended by the commission.  The owner, officer, general partner, or authorized agent of the utility shall certify that the reports were prepared in accordance with the standard chart of accounts.

     (g)  Any automatic fuel rate adjustment clause requested by a public utility in an application filed with the commission shall be designed, as determined in the commission's discretion, to:

     (1)  Fairly share the risk of fuel cost changes between the public utility and its customers;

     (2)  Provide the public utility with sufficient incentive to reasonably manage or lower its fuel costs and encourage greater use of renewable energy;

     (3)  Allow the public utility to mitigate the risk of sudden or frequent fuel cost changes that cannot otherwise reasonably be mitigated through other commercially available means, such as through fuel hedging contracts;

     (4)  Preserve, to the extent reasonably possible, the public utility's financial integrity; and

     (5)  Minimize, to the extent reasonably possible, the public utility's need to apply for frequent applications for general rate increases to account for the changes to its fuel costs.

     (h)  For the purposes of ratemaking, any two or more electric utility companies in the state held by the same financial holding company shall be deemed to be a single entity.   The public utilities commission shall approve just and reasonable statewide rates for ratepayers of electric utility companies held by the same financial holding company without regard to location of the ratepayer.  The commission shall ensure that the rates do not diminish any electric utility company's opportunity to earn a fair rate of return.  The rates shall be based upon the following:

     (1)  A fixed monthly connection service charge;

     (2)  A variable monthly electricity transmission and distribution rate;

     (3)  A variable monthly electricity consumption rate; and

     (4)  Other fees, taxes, and charges as approved by the commission.

     For the purposes of this subsection:

     "Electric utility company" means the same as defined in section 269-91.

     "Financial holding company" means the same as defined in section 241-1."

     SECTION 5.  Section 269-27.2, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:

     "(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.  The commission, in conjunction with any electric public utility, shall place a priority on the development of firm and distributable geothermal-based electricity to replace existing fossil fuel-based power generation facilities.

     (b)  The public utilities commission [may] shall direct public utilities that supply electricity to the public, except a public utility exempt from federal taxes under section 501(c)(12) of the Internal Revenue Code, to [arrange]:

     (1)  Prior to acquiring electricity from fossil fuel sources, arrange for the acquisition of and to acquire the lowest cost, electrical grid-safe electricity generated from nonfossil fuel sources [as is available from and the] by producers who are willing and able to make that electricity available to the public utilities[,]; and [to employ]

     (2)  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."

     SECTION 6.  Section 269-91, Hawaii Revised Statutes, is amended by amending the definition of "electric utility company" to read as follows:

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

     SECTION 7.  This Act shall not be applied so as to impair any contract existing as of the effective date of this Act in a manner violative of either the Hawaii state constitution or Article I, Section 10, of the United States Constitution.

     SECTION 8.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 9.  This Act shall take effect on January 1, 2015; provided that sections 2, 3, and 6 of this Act shall take effect on January 1, 2025.

 

INTRODUCED BY:	_____________________________

 

 

Report Title:

Electric Public Utilities; Operations; Rates; Energy Sources

 

 

Description:

Limits electric public utilities to delivering electricity.  Prohibits acquisition of electricity by an electric public utility power purchase agreement with an affiliated entity.  Requires electric public utilities to purchase lowest cost, nonfossil fuel generated electricity prior to purchasing fossil fuel generated electricity.  Requires PUC to establish a statewide electricity rate for utilities held by the same holding company.  Exempts utilities qualifying as a cooperation under section 501(c)(12) of the IRC.  Prioritizes geothermal as a replacement for fossil fuel.

 

 

 

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