Bill Text: HI SB3096 | 2024 | Regular Session | Introduced
Bill Title: Relating To Wildfire Risk Mitigation.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced) 2024-02-16 - Report adopted; Passed Second Reading, as amended (SD 1) and referred to CPN/WAM. [SB3096 Detail]
Download: Hawaii-2024-SB3096-Introduced.html
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THE SENATE |
S.B. NO. |
3096 |
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THIRTY-SECOND LEGISLATURE, 2024 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO WILDFIRE RISK MITIGATION.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
The legislature also finds that a resilience working group, convened throughout 2019 and 2020, sought to: (1) identify and prioritize resilience threat scenarios and potential grid impacts; (2) identify key customer and infrastructure sector capabilities and needs following a severe event and loss of power; (3) identify gaps and priorities in grid and customer capabilities following a severe event and loss of power; (4) provide recommendations and inputs for investor-owned utility grid planning to address resilience needs; and (5) recommend additional grid and customer actions to close gaps and capabilities following severe events. The resilience working group identified wildfires as one of five types of severe events of utmost importance to consider for achieving a resilient grid and provided resilience options for utilities to consider.
The legislature further finds that securitization may be the most efficient, least-cost way to finance wildfire risk mitigation costs and expenses. Utility rate securitization transactions have an extensive track record of success. Bonds securitized by rates receive AAA credit ratings from credit rating agencies and thus provide a means of securing capital at a lower interest rate than those currently available to utilities, in particular utilities without an investment grade credit rating.
The purpose of this Act is to create a process whereby electric utilities develop and submit effective wildfire risk protection plans to the public utilities commission for approval; the public utilities commission evaluates those plans and either approves them or does so with modifications; the electric utilities are able to timely recover the prudently incurred costs and expenses of developing, implementing, and administrating those plans; and those costs and expenses are not borne disproportionately by any particular ratepayer or county.
SECTION 2. Chapter 269, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:
"PART .
WILDFIRE PROTECTION AND MITIGATION
§269-A Definitions. As used in this part:
"Ancillary agreement" means a bond insurance policy, letter of credit, reserve account, surety bond, swap arrangement, hedging arrangement, liquidity or credit support arrangement, or other similar agreement or arrangement entered into in connection with the issuance of bonds that is designed to promote the credit quality and marketability of the bonds or to mitigate the risk of an increase in interest rates.
"Bond" means any bond, note, or other evidence of indebtedness that is issued by the financing entity under a financing order, the proceeds of which are used directly or indirectly to recover, finance, or refinance financing costs of any wildfire protection costs, and that are secured by or payable from wildfire protection property.
"Department" means any state department or agency.
"Electric utility" means a public utility, as defined in section 269-1, that is engaged in the production, transmission, or distribution of electricity.
"Financing costs" means the costs to issue, service, repay, or refinance bonds, whether incurred or paid upon issuance of the bonds or over the life of the bonds, if they are approved for recovery by the public utilities commission in a financing order. "Financing costs" may include any of the following:
(1) Principal, interest, and redemption premiums that are payable on bonds;
(2) A payment required under an ancillary agreement;
(3) An amount required to fund or replenish reserve accounts or other accounts established under an indenture, ancillary agreement, or other financing document related to the bonds;
(4) Taxes, franchise fees, or license fees imposed on the wildfire protection plan fee;
(5) Costs related to issuing and servicing bonds or the application for a financing order, including, without limitation, servicing fees and expenses, trustee fees and expenses, legal fees and expenses, accounting fees, administrative fees, underwriting and placement fees, financial advisory fees, original issue discount, capitalized interest, rating agency fees, and any other related costs that are approved for recovery in the financing order; and
(6) Other costs as specifically authorized by a financing order.
"Financing entity" means a public utility that is authorized by the public utilities commission to issue bonds or acquire wildfire protection property, or both, pursuant to a financing order.
"Financing order" means an order of the public utilities commission under this part that has become final as provided by law, and that authorizes the issuance of bonds and the imposition, adjustment from time to time, and collection of wildfire protection fees.
"Wildfire protection costs" means any capital costs and operation and maintenance expenses related to the development, implementation, and administration of a wildfire protection plan prepared pursuant to section 269-C(a) but shall not include any penalties levied against an electric utility pursuant to section 269-D.
"Wildfire protection fee" means the nonbypassable fees and charges authorized by section 269-G and in a financing order authorized under this part to be imposed on and collected from all existing and future customers of a financing entity or any successor.
"Wildfire protection plan" means the risk-based wildfire protection plan mandated by section 269-C(a) and approved by the public utilities commission.
"Wildfire protection property" means the property right created pursuant to this part, including, without limitation, the right, title, and interest of the financing entity or its transferee:
(1) In and to the wildfire protection fee established pursuant to a financing order, including all rights to obtain adjustments to the wildfire protection fee in accordance with section 269-G and the financing order;
(2) To be paid in the amount that is determined in a financing order to be the amount that the public utility or its transferee is lawfully entitled to receive pursuant to this part and the proceeds thereof, and in and to all revenues, collections, claims, payments, moneys, or proceeds of, or arising from, the wildfire protection fee that is the subject of a financing order.
§269-B Electric utility workshops. The public utilities commission may periodically convene workshops to help electric utilities develop and share information for the identification, adoption, and implementation of best practices regarding wildfires, including but not limited to risk-based wildfire protection and risk-based wildfire mitigation procedures and standards.
§269-C
Wildfire protection plans.
(a) Each electric utility shall
have and operate in compliance with a risk-based wildfire protection plan,
which shall be filed with and evaluated by the public utilities
commission. The risk-based wildfire
protection plan shall be based on reasonable and prudent practices, which may
be identified through workshops and regulatory proceedings conducted by the
public utilities commission pursuant to section 269-B, and public utilities
commission standards adopted by decision or rule. The electric utility shall design the
risk-based wildfire protection plan to protect public safety, reduce risk to
utility customers, and promote resilience of the Hawaii electric system to wildfire
damage. Each electric utility's plan
shall, at a minimum:
(1) Identify areas that are subject to a heightened risk of wildfire and are:
(A) Within the right of way or legal control or ownership of the electric utility; and
(B) Outside the right of way or legal control or ownership of the electric utility but within a reasonable distance, as determined by the public utilities commission, of the electric utility's generation or transmission assets;
(2) Identify a means for mitigating wildfire risk that reflects a reasonable balancing of mitigation costs with the resulting reduction of wildfire risk;
(3) Identify preventive actions and programs that the electric utility shall carry out to minimize the risk of utility facilities causing wildfire;
(4) After seeking information from state and local entities, identify a protocol for the deenergizing of power lines and adjusting of power system operations to mitigate wildfires, promote the safety of the public and first responders, and preserve health and communication infrastructure;
(5) Describe the procedures, standards, and time frames that the electric utility shall use to inspect utility infrastructure in areas that the electric utility identifies under paragraph (1), including whether those procedures, standards, and time frames are already set forth in the electric utility's existing plans or protocols and in coordination with any relevant entities;
(6) Describe the procedures, standards, and time frames that the electric utility will use to carry out vegetation management in areas that the electric utility identifies under paragraph (1), including whether those procedures, standards, and time frames are already set forth in the electric utility's existing plans or protocols and in coordination with any relevant entities;
(7) Identify the estimated development, implementation, and administration costs for the risk-based wildfire protection plan; and
(8) Identify community outreach and public awareness efforts that the electric utility will use before, during, and after a wildfire.
(b) Each electric utility shall regularly update its risk-based wildfire protection plan on a schedule determined by the public utilities commission.
(c) To develop the risk-based wildfire protection plan, the electric utility may consult with and consider information from federal, state, local, and other expert entities.
(d) The public utilities commission, in consultation with the department of land and natural resources and local emergency services agencies, shall evaluate each electric utility's risk-based wildfire protection plan and plan updates through a public process.
(e) No more than ninety days after the last party filing, and no more than a total of one hundred eighty days after the initial filing in the docket or non-docketed case related to the public utilities commission's evaluation of a risk-based wildfire protection plan or plan update from an electric utility, the public utilities commission shall approve or approve with conditions the plan or update if the public utilities commission finds that the plan or update is based on reasonable and prudent practices and designed to meet all applicable rules and standards adopted by the public utilities commission. The public utilities commission may, in approving the plan or update with conditions, direct the electric utility to make modifications to the plan or updates that the public utilities commission believes represent a reasonable balancing of mitigation costs with the resulting reduction of wildfire risk based on the information provided by the electric utility and based on best practices. The public utilities commission shall issue a decision explaining any such directed modifications at the time it approves the plan.
(f) The public utilities commission's approval of a risk-based wildfire protection plan does not by itself establish a defense to any enforcement action for violation of a public utilities commission decision, order, or rule, or relieve an electric utility from proactively managing wildfire risk, including by monitoring emerging practices and technologies. Electric utilities are expected to continuously improve and take reasonable actions outside of approved plans to mitigate wildfire risk.
(g) The public utilities commission shall, as appropriate, adopt rules or issue orders for the implementation of this section. The rules or orders may include but need not be limited to procedures and standards regarding vegetation management, public power safety shutoffs and restorations, pole materials, circuitry, and monitoring systems.
§269-D Penalties. In addition to any other penalties provided by law, a failure by an electric utility to comply with an approved plan or part of an approved plan shall be subject to a civil penalty, as determined by the public utilities commission. Imposition of penalties pursuant to this section shall otherwise be in accordance with section 269-28 and all applicable administrative rules. All moneys collected under this section shall be deposited into the public utilities commission special fund.
§269-E Applications to issue bonds and authorize wildfire protection fees. (a) An electric utility or department may apply to the public utilities commission for one or more financing orders to issue bonds to recover any wildfire protection costs, each of which authorizes the following:
(1) The imposition, charging, and collection of a wildfire protection fee, to become effective upon the issuance of the bonds, and an adjustment of any such wildfire protection fee in accordance with an adjustment mechanism under this part in amounts sufficient to pay the principal of and interest on bonds and all related financing costs on a timely basis; and
(2) The creation of wildfire protection property under the financing order.
(b) The application shall include all of the following:
(1) The principal amount of the bonds proposed to be issued;
(2) An estimate of the date each series of bonds is expected to be issued;
(3) The expected term, not to exceed thirty years, during which term the wildfire protection fee associated with the issuance of each series of bonds is expected to be imposed and collected;
(4) An estimate of the financing costs associated with the issuance of each series of bonds;
(5) An estimate of the amount of the wildfire protection fee revenues necessary to pay principal and interest on the bonds and related financing costs as set forth in the application and the calculation for that estimate;
(6) A proposed methodology for allocating the wildfire protection fee among customer classes within the financing entity;
(7) A description of a proposed formulaic adjustment mechanism for the adjustment of the wildfire protection fee to correct for any overcollection or undercollection of the wildfire protection fee, and to otherwise ensure the timely payment of principal and interest on the bonds and related financing costs; and
(8) Any other information required by the public utilities commission.
(c) The public utilities commission shall issue an approval or denial of any application for a financing order filed pursuant to this section within ninety days of the last filing in the applicable docket.
(d) In exercising its duties under this section, the public utilities commission shall consider:
(1) Whether the wildfire protection costs to be financed by any bonds to be issued are just and reasonable;
(2) Whether the terms and conditions of any bonds to be issued are just and reasonable;
(3) Whether the immediate ratepayer bill impact of any financing order is minimized to the furthest extent practicable; and
(4) Any other factors that the public utilities commission deems reasonable and in the public interest.
§269-F Wildfire protection plan financing order. (a) A financing order shall remain in effect until the bonds issued under the financing order and all financing costs related to the bonds have been paid in full or defeased by their terms. A financing order shall remain in effect and unabated notwithstanding the bankruptcy, reorganization, or insolvency of the financing entity or the commencement of any judicial or nonjudicial proceeding on the financing order.
(b) Once a financing order has become final as provided by law, the financing order shall become irrevocable. The public utilities commission may not directly or indirectly, except as provided in the adjustment mechanism approved in the financing order, reduce, impair, postpone, rescind, alter, or terminate the wildfire protection plan fee authorized in the financing order or impair the wildfire protection property or the collection of the wildfire protection plan fee so long as any bonds are outstanding or any financing costs remain unpaid.
(c) Under a final financing order, the financing entity shall retain sole discretion to cause bonds to be issued, including the right to defer or postpone such issuance, assignment, sale, or transfer.
§269-G Wildfire protection fee. (a) The public utilities commission may create, pursuant to a financing order approved pursuant to section 269-F, a nonbypassable surcharge for a financing entity, referred to as a wildfire protection fee, which shall be applied to the repayment of bonds and related financing costs as described in this part. The wildfire protection fee may be a usage-based surcharge, a flat user fee, or a charge based upon customer revenues as determined by the public utilities commission for each customer class in any financing order.
(b) As long as any bonds are outstanding and any financing costs have not been paid in full, any wildfire protection fee authorized under a financing order shall be nonbypassable. Subject to any exceptions provided in a financing order, a wildfire protection fee shall be paid by all existing and future customers of a financing entity or any successors.
(c) The wildfire protection plan fee shall be collected by a financing entity or its successors, in accordance with section 269-G(a), in full through a surcharge, fee, or charge that is separate and apart from the financing entity's rates.
(d) A financing entity may exercise the same rights and remedies under its tariff and applicable law and regulation based on a customer's nonpayment of the wildfire protection plan fee as it could for a customer's failure to pay any other charge payable to that public utility.
§269-H Financing entity successor requirements; default of financing entity. (a) Any successor to a financing entity subject to a financing order shall be bound by the requirements of this part. The successor shall perform and satisfy all obligations of the financing entity under the financing order, in the same manner and to the same extent as the financing entity, including the obligation to collect and pay the wildfire protection plan fee to any financing party as required by a financing order.
(b) The public utilities commission may require in a financing order that, if a default by the financing entity in remittance of the wildfire protection plan fee collected arising with respect to wildfire protection property occurs, the public utilities commission, without limiting any other remedies available to any financing party by reason of the default, shall order the sequestration and payment to the beneficiaries of the wildfire protection plan fee collected arising with respect to the wildfire protection plan property. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the financing entity.
§269-I Treatment of bonds, fees, and property. (a) Neither financing orders nor bonds issued under this part shall constitute a debt or liability of the State or of any political subdivision thereof, nor shall they constitute a pledge of the full faith and credit of the State or any of its political subdivisions, but are payable solely from the funds provided therefor under this part. All bonds shall contain on the face thereof a statement to the following effect: "Neither the full faith and credit nor the taxing power of the State of Hawaii is pledged to the payment of the principal of, or interest on, this bond."
(b) The issuance of bonds under this part shall not directly, indirectly, or contingently obligate the State or any political subdivision thereof to levy or pledge any form of taxation or to make any appropriation for their payment.
§269-J Severability. If any provision of this part is held to be invalid or is superseded, replaced, repealed, or expires for any reason:
(1) That occurrence shall not affect any action allowed under this part that is taken prior to that occurrence by the public utilities commission, a financing entity, a bondholder, or any financing party, and any such action shall remain in full force and effect; and
(2) The validity and enforceability of the rest of this part shall remain unaffected."
SECTION 3. Chapter 269-17, Hawaii Revised Statutes, is amended to read as follows:
"§269-17
Issuance of securities. A
public utility corporation may, on securing the prior approval of the public
utilities commission, and not otherwise, except as provided in section
269-E, issue stocks and stock certificates, bonds, notes, and other
evidences of indebtedness, payable at periods of more than twelve months after
the date thereof, for the following purposes and no other, namely: for the acquisition of property or for the
construction, completion, extension, or improvement of or addition to its
facilities or service, or for the discharge or lawful refunding of its
obligations or for the reimbursement of moneys actually expended from income or
from any other moneys in its treasury not secured by or obtained from the issue
of its stocks or stock certificates, or bonds, notes, or other evidences of
indebtedness, for any of the aforesaid purposes except maintenance of service,
replacements, and substitutions not constituting capital expenditure in cases
where the corporation has kept its accounts for such expenditures in such
manner as to enable the commission to ascertain the amount of moneys so
expended and the purposes for which the expenditures were made, and the sources
of the funds in its treasury applied to the expenditures. As used herein, "property" and "facilities",
mean property and facilities used in all operations of a public utility
corporation whether or not included in its public utility operations or rate
base. A public utility corporation may
not issue securities to acquire property or to construct, complete, extend or
improve or add to its facilities or service if the commission determines that
the proposed purpose will have a material adverse effect on its public utility
operations.
All stock and every stock certificate, and
every bond, note, or other evidence of indebtedness of a public utility
corporation not payable within twelve months, issued without an order of the
commission authorizing the same, then in effect, shall be void."
SECTION 4. Each electric utility shall file its first risk-based wildfire protection plan with the public utilities commission required under section 269-B, Hawaii Revised Statutes, established by section 2 of this Act, no later than December 31, 2024.
SECTION 5. Notwithstanding the provisions of Act 262, Session Laws of Hawaii 2023, the legislature authorizes the issuance of special purpose revenue bonds for wildfire risk migration purposes that requires an allocation of the annual state ceiling under section 39B-2, Hawaii Revised Statutes, for the period July 1, 2024, through December 31, 2028.
SECTION 6. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.
SECTION 7. In codifying the new part added to chapter 269, Hawaii Revised Statutes, by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating and referring to 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 upon its approval.
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INTRODUCED BY: |
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BY REQUEST |
Report Title:
Wildfires; Mitigation; Protection; Public Utilities Commission; Electric Utilities; Securitization; Risk Protection Plans
Description:
Creates a process for electric utilities to develop and submit wildfire protection plans to the Public Utilities Commission for approval and allow the recovery of related costs and expenses through securitization, while avoiding a disproportionate impact on a specific ratepayer or county.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.
