[atlas:bill]

AN ACT Relating to the management of state energy supply and demand; amending RCW 80.50.020, 80.50.060, 80.50.100, 80.52.030, 82.16.055, 19.29A.040, 82.08.02567, and 82.12.02567; adding new sections to chapter 80.50 RCW; adding a new section to chapter 80.52 RCW; adding a new section to chapter 82.34 RCW; adding new sections to chapter 82.08 RCW; adding new sections to chapter 82.12 RCW; adding a new section to chapter 19.29A RCW; creating new sections; providing expiration dates; and declaring an emergency.

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

NEW SECTION. Sec. 1. (1) The legislature finds that:

(a) A sufficient and reliable supply of energy is critically important to the health and welfare of the citizens of the state and to the prosperity of the state and region;

(b) The cyclical nature of wholesale markets has affected the ability of independent energy producers to forecast long-term prices sufficient to ensure recovery of their investments. Low wholesale prices in the region for nearly a decade have curtailed the development of generation resources by independent power producers that could have addressed the region's growing electricity deficit, which was predicted as early as 1993 and acknowledged in the Washington state energy strategy. The prospect of potential new regulations over the wholesale electricity market, and concerns about the ability of utilities and energy marketers to recover their costs, have further undermined confidence in financial markets. Without greater regulatory incentives, needed investments in new resource and system upgrades by electrical companies may not be realized;

(c) Energy supply, generation, and distribution systems and technologies have changed greatly since the original enactment of the state's energy facility siting laws thirty years ago. Experience during this time has demonstrated that a state council with the primary responsibility for energy facility siting approval is warranted, but that its procedures and authorities can be improved to enhance energy supplies;

(d) The state enjoys an abundance of hydroelectric capacity. Additional generation can be achieved without increasing the amount of water used and without adversely impacting fish and wildlife;

(e) Domestic industries have become innovators in clean, new energy generation, and demand-management technologies. Those technologies could be marketed internationally to promote the economic development of the state, and further advance the reputation of the state as a technological leader; and

(f) The current energy situation requires that the state undertake economic and policy decisions to effectuate both short-term and long-term solutions. Actions and incentives by the state to promote the expansion of generation capacity and the development and application of clean, new energy technologies would be of great benefit to the citizens of the state.

(2) The legislature intends this act to:

(a) Modify the statutory procedures and authorities of the energy facility siting evaluation council for a limited time to encourage generators to operate their facilities to their fullest capacity;

(b) Provide a regulatory incentive for electrical companies to invest in demand-management systems, promote distributive generation technologies, upgrade hydroelectric facilities, increase transmission and distribution efficiencies, and encourage certain renewable resource projects; and

(i) Installation of new air pollution control equipment at existing peaking plants to decrease certain toxic emissions and increase overall generation output;

(ii) Upgrades of existing hydroelectric facilities to increase efficiency and generation capacity;

(iii) Development of cogeneration facilities to maximize the efficient use of gas while increasing electricity supply nearer the load;

(iv) Research, development, and manufacture of innovative energy technologies and demand-management technologies; and

(v) Deployment of demand-management systems.

I. PROMOTING ADDITIONAL GENERATION CAPACITY

Sec. 101. RCW 80.50.020 and 1995 c 69 s 1 are each amended to read as follows:

The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.

(1) "Applicant" means any person who makes application for a site certification pursuant to the provisions of this chapter((;)).

(2) "Application" means any request for approval of a particular site or sites filed in accordance with the procedures established pursuant to this chapter, unless the context otherwise requires((;)).

(3) "Person" means an individual, partnership, joint venture, private or public corporation, association, firm, public service company, political subdivision, municipal corporation, government agency, public utility district, or any other entity, public or private, however organized((;)).

(4) "Site" means any proposed or approved location of an energy facility((;)).

(5) "Certification" means a binding agreement between an applicant and the state which shall embody compliance to the siting guidelines, in effect as of the date of certification, which have been adopted pursuant to RCW 80.50.040 as now or hereafter amended as conditions to be met prior to or concurrent with the construction or operation of any energy facility((;)).

(6) "Associated facilities" means storage, transmission, handling, or other related and supporting facilities connecting an energy plant with the existing energy supply, processing, or distribution system, including, but not limited to, communications, controls, mobilizing or maintenance equipment, instrumentation, and other types of ancillary transmission equipment, off-line storage or venting required for efficient operation or safety of the transmission system and overhead, and surface or subsurface lines of physical access for the inspection, maintenance, and safe operations of the transmission facility and new transmission lines constructed to operate at nominal voltages in excess of 200,000 volts to connect a thermal power plant to the northwest power grid: PROVIDED, That common carrier railroads or motor vehicles shall not be included((;)).

(7) "Transmission facility" means any of the following together with their associated facilities:

(a) Crude or refined petroleum or liquid petroleum product transmission pipeline of the following dimensions: A pipeline larger than six inches minimum inside diameter between valves for the transmission of these products with a total length of at least fifteen miles;

(b) Natural gas, synthetic fuel gas, or liquified petroleum gas transmission pipeline of the following dimensions: A pipeline larger than fourteen inches minimum inside diameter between valves, for the transmission of these products, with a total length of at least fifteen miles for the purpose of delivering gas to a distribution facility, except an interstate natural gas pipeline regulated by the United States federal power commission((;)).

(8) "Independent consultants" means those persons who have no financial interest in the applicant's proposals and who are retained by the council to evaluate the applicant's proposals, supporting studies, or to conduct additional studies((;)).

(9) "Thermal power plant" means, for the purpose of certification, any electrical generating facility using any fuel, including nuclear materials, for distribution of electricity by electric utilities((;)).

(10) "Energy facility" means an energy plant or transmission facilities: PROVIDED, That the following are excluded from the provisions of this chapter:

(a) Facilities for the extraction, conversion, transmission or storage of water, other than water specifically consumed or discharged by energy production or conversion for energy purposes; and

(b) Facilities operated by and for the armed services for military purposes or by other federal authority for the national defense((;)).

(11) "Council" means the energy facility site evaluation council created by RCW 80.50.030((;)).

(12) "Counsel for the environment" means an assistant attorney general or a special assistant attorney general who shall represent the public in accordance with RCW 80.50.080((;)).

(13) "Construction" means on-site improvements, excluding exploratory work, which cost in excess of two hundred fifty thousand dollars((;)).

(14) "Energy plant" means the following facilities together with their associated facilities:

(a) Any stationary thermal power plant with generating capacity of ((~~two~~)) three hundred fifty thousand kilowatts or more, measured using maximum continuous electric generating capacity, less minimum auxiliary load, at average ambient temperature and pressure, and floating thermal power plants of fifty thousand kilowatts or more, including associated facilities;

(b) Facilities which will have the capacity to receive liquified natural gas in the equivalent of more than one hundred million standard cubic feet of natural gas per day, which has been transported over marine waters;

(c) Facilities which will have the capacity to receive more than an average of fifty thousand barrels per day of crude or refined petroleum or liquified petroleum gas which has been or will be transported over marine waters, except that the provisions of this chapter shall not apply to storage facilities unless occasioned by such new facility construction;

(d) Any underground reservoir for receipt and storage of natural gas as defined in RCW 80.40.010 capable of delivering an average of more than one hundred million standard cubic feet of natural gas per day; and

(e) Facilities capable of processing more than twenty-five thousand barrels per day of petroleum into refined products((;)).

(15) "Land use plan" means a comprehensive plan or land use element thereof adopted by a unit of local government pursuant to chapters 35.63, 35A.63, or 36.70 RCW((;)).

(16) "Zoning ordinance" means an ordinance of a unit of local government regulating the use of land and adopted pursuant to chapters 35.63, 35A.63, or 36.70 RCW or Article XI of the state Constitution.

NEW SECTION. Sec. 102. A new section is added to chapter 80.50 RCW to read as follows:

The council shall actively seek to implement the intent of this chapter as set forth in RCW 80.50.010 by diligently and expediently facilitating the siting of energy facilities to meet present and emergent energy supply needs.

NEW SECTION. Sec. 103. A new section is added to chapter 80.50 RCW to read as follows:

The council may only develop rules, policies, procedures, guidelines, or operating protocols that are based directly on, and no more stringent than federal or state statutory or administrative code authority, and the standards and criteria set forth therein. A site certification agreement may not require compliance with air quality, water quality, or health protection measures unless such compliance is based on and no more stringent than standards adopted into federal or state statute or administrative code authority.

Sec. 104. RCW 80.50.060 and 1977 ex.s. c 371 s 5 are each amended to read as follows:

(1) The provisions of this chapter shall apply to the construction of energy facilities which includes the new construction of energy facilities and the reconstruction or enlargement of existing energy facilities where the net increase in physical capacity or dimensions resulting from such reconstruction or enlargement meets or exceeds those capacities or dimensions set forth in RCW 80.50.020 (7) and ((~~(17)~~)) (14), as now or hereafter amended. No construction of such energy facilities may be undertaken, except as otherwise provided in this chapter, after July 15, 1977, without first obtaining certification in the manner provided in this chapter.

(2) The provisions of this chapter apply to the construction of any new energy facility or the reconstruction or enlargement of any existing energy facility that chooses to utilize the process established in this chapter, regardless of the generating capacity of the project.

(3) The provisions of this chapter shall not apply to normal maintenance and repairs which do not increase the capacity or dimensions beyond those set forth in RCW 80.50.020 (7) and ((~~(17)~~)) (14), as now or hereafter amended.

((~~(3)~~)) (4) Applications for certification of energy facilities made prior to July 15, 1977, shall continue to be governed by the applicable provisions of law in effect on the day immediately preceding July 15, 1977, with the exceptions of RCW 80.50.190 and 80.50.071 which shall apply to such prior applications and to site certifications prospectively from July 15, 1977.

((~~(4)~~)) (5) Applications for certification shall be upon forms prescribed by the council and shall be supported by such information and technical studies as the council may require.

Sec. 105. RCW 80.50.100 and 1989 c 175 s 174 are each amended to read as follows:

(1) The council shall report to the governor its recommendations as to the approval or rejection of an application for certification within ((~~twelve~~)) six months of receipt by the council of such an application, or such later time as is mutually agreed by the council and the applicant. If the council recommends approval of an application for certification, it shall also submit a draft certification agreement with the report. The council shall include conditions in the draft certification agreement to implement the provisions of this chapter, including, but not limited to, conditions to protect state or local governmental or community interests affected by the construction or operation of the energy facility, and conditions designed to recognize the purpose of laws or ordinances, or rules or regulations promulgated thereunder, that are preempted or superseded pursuant to RCW 80.50.110 as now or hereafter amended.

(2) Within ((~~sixty~~)) thirty days of receipt of the council's report the governor shall take one of the following actions:

(a) Approve the application and execute the draft certification agreement; or

(b) Reject the application; or

The council shall reconsider such aspects of the draft certification agreement by reviewing the existing record of the application or, as necessary, by reopening the adjudicative proceeding for the purposes of receiving additional evidence. Such reconsideration shall be conducted expeditiously. The council shall resubmit the draft certification to the governor incorporating any amendments deemed necessary upon reconsideration within ninety days of receipt of such direction for reconsideration. Within ((~~sixty~~)) fifteen days of receipt of such draft certification agreement, the governor shall either approve the application and execute the certification agreement or reject the application. The certification agreement shall be binding upon execution by the governor and the applicant.

(3) The rejection of an application for certification by the governor shall be final as to that application but shall not preclude submission of a subsequent application for the same site on the basis of changed conditions or new information.

Sec. 106. RCW 80.52.030 and 1995 c 69 s 2 are each amended to read as follows:

The definitions set forth in this section apply throughout this chapter unless the context clearly requires otherwise.

(1) "Public agency" means a public utility district, joint operating agency, city, county, or any other state governmental agency, entity, or political subdivision.

(2) "Major public energy project" means a nuclear power plant ((or installation capable, or intended to be capable, of generating electricity in an amount greater than two hundred fifty megawatts, measured using maximum continuous electric generating capacity, less minimum auxiliary load, at average ambient temperature and pressure. Where two or more such plants are located within the same geographic site, each plant shall be considered a major public energy project. An addition to an existing facility is not deemed to be a major energy project unless the addition itself is capable, or intended to be capable, of generating electricity in an amount greater than two hundred fifty megawatts)). A project which is under construction on July 1, 1982, shall not be considered a major public energy project unless the official agency budget or estimate for total construction costs for the project as of July 1, 1982, is more than two hundred percent of the first official estimate of total construction costs as specified in the senate energy and utilities committee WPPSS inquiry report, volume one, January 12, 1981, and unless, as of July 1, 1982, the projected remaining cost of construction for that project exceeds two hundred million dollars.

(3) "Cost of construction" means the total cost of planning and building a major public energy project and placing it into operation, including, but not limited to, planning cost, direct construction cost, licensing cost, cost of fuel inventory for the first year's operation, interest, and all other costs incurred prior to the first day of full operation, whether or not incurred prior to July 1, 1982.

(4) "Cost of acquisition" means the total cost of acquiring a major public energy project from another party, including, but not limited to, principal and interest costs.

(5) "Bond" means a revenue bond, a general obligation bond, or any other indebtedness issued by a public agency or its assignee.

(6) "Applicant" means a public agency, or the assignee of a public agency, requesting the secretary of state to conduct an election pursuant to this chapter.

(7) "Cost-effective" means that a project or resource is forecast:

(a) To be reliable and available within the time it is needed; and

(b) To meet or reduce the electric power demand of the intended consumers at an estimated incremental system cost no greater than that of the least-cost similarly reliable and available alternative project or resource, or any combination thereof.

(8) "System cost" means an estimate of all direct costs of a project or resource over its effective life, including, if applicable, the costs of distribution to the consumer, and, among other factors, waste disposal costs, end-of-cycle costs, and fuel costs (including projected increases), and such quantifiable environmental costs and benefits as are directly attributable to the project or resource.

NEW SECTION. Sec. 107. A new section is added to chapter 80.52 RCW to read as follows:

(1) Before approving financing for any large public energy project that is not subject to the voter approval requirements of this chapter, a public agency must submit to its governing board a cost-effectiveness study pertaining to the project under consideration. The study must be prepared by an independent consultant and must be available for public review and comment for at least thirty days after submission to the governing board.

(2) At the end of the thirty-day period, the public agency must conduct a public hearing on the project under consideration and the cost-effectiveness study. Notice of the public hearing must provide at least the following information:

(a) The name, location, and type of large public energy project, expressed in common terms;

(b) The dollar amount and type of bonds being requested;

(c) If the bond issuance is intended to finance the acquisition of all or a portion of the project, the anticipated total cost of the acquisition of the project;

(d) If the bond issuance is intended to finance the planning or construction of all or a portion of the project, the anticipated total cost of construction of the project;

(e) The projected average rate increase for consumers of the electricity to be generated by the project. The rate increase must be that which is necessary to repay the total indebtedness incurred for the project, including estimated interest;

(f) A summary of the final cost-effectiveness study conducted under subsection (1) of this section;

(g) The anticipated functional life of the project; and

(h) The anticipated decommissioning costs of the project.

(3) For the purposes of this section, a "large public energy project that is not subject to the voter approval requirements of this chapter" means a nonnuclear plant or installation capable, or intended to be capable, of generating electricity in an amount greater than two hundred fifty megawatts, measured using maximum continuous electric generating capacity, less minimum auxiliary load, at average ambient temperature and pressure. Where two or more such plants are located within the same geographic site, each plant is considered a large public energy project. An addition to an existing facility is not a large public energy project unless the addition itself is capable, or intended to be capable, of generating electricity in an amount greater than two hundred fifty megawatts.

II. MAXIMIZING EFFICIENT GENERATION CAPACITY

NEW SECTION. Sec. 201. A new section is added to chapter 82.34 RCW to read as follows:

(1) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.

(a) "Qualifying facility" means an air pollution control facility as that term is defined in RCW 82.34.010(1)(a) to be installed or acquired for a thermal electric peaking plant and which is approved under the Washington clean air act, chapter 70.94 RCW.

(b) "Thermal electric peaking plant" means a natural gas‑fired thermal electric generating facility operated by a light and power business and placed into service between January 1, 1978, and December 31, 1984, and that is registered for the calendar year 2000 pursuant to RCW 70.94.151.

(2) The department shall, upon written request of a light and power business to which the approval issued under chapter 70.94 RCW is attached, make a determination as to whether a plant is a thermal electric peaking plant acquiring or installing a qualifying facility eligible under this section. The department shall consult with the department of community, trade, and economic development and the department of ecology in making the determination. If the determination is in the affirmative, the department shall issue the light and power business a sales and use tax exemption certificate in a form and manner as deemed appropriate by the department.

(3) The charges for installation or acquisition of a qualifying facility by the holder of the certificate are exempt from sales tax imposed under chapter 82.08 RCW and use tax imposed under chapter 82.12 RCW. The purchaser must provide the seller with a copy of the sales and use tax exemption certificate. The seller shall retain a copy of the certificate for the seller's files.

(4) The exemption in this section is limited to the installation or acquisition of a qualifying facility and does not apply to servicing, maintenance, operation, or repairs of a thermal electric peaking plant or of an air pollution control facility.

NEW SECTION. Sec. 202. A new section is added to chapter 82.08 RCW to read as follows:

(1) The tax levied by RCW 82.08.020 does not apply to:

(a) Sales of tangible personal property to an electric utility for improving the output or efficiency of hydroelectric generating facilities in existence on the effective date of this section; or

(b) Sales of or charges made for labor and services performed in respect to improving the output or efficiency of hydroelectric generating facilities in existence on the effective date of this section.

(2) The following definitions apply to this section unless the context clearly requires otherwise.

(a) "Electric utility" has the same meaning as provided under RCW 19.29A.010.

(b) "Hydroelectric generating facilities" means any machinery, equipment, structure, property, property improvement, or accessory installed, built, or acquired for the purpose of producing or generating electrical energy from falling water.

(3) The purchaser must provide the seller with an exemption certificate in a form and manner prescribed by the department. The seller must retain a copy of the certificate for the seller's files.

NEW SECTION. Sec. 203. A new section is added to chapter 82.12 RCW to read as follows:

(1) The tax levied by RCW 82.12.020 does not apply to the use of tangible personal property by an electric utility for improving the output or efficiency of hydroelectric generating facilities in existence on the effective date of this section.

(2) The following definitions apply to this section unless the context clearly requires otherwise.

(a) "Electric utility" has the same meaning as provided under RCW 19.29A.010.

(3) The purchaser must provide the seller with an exemption certificate in a form and manner prescribed by the department. The seller must retain a copy of the certificate for the seller's files.

Sec. 204. RCW 82.16.055 and 1980 c 149 s 3 are each amended to read as follows:

(1) In computing tax under this chapter there shall be deducted from the gross income:

(a) An amount equal to the cost of production at the plant for consumption within the state of Washington of:

(i) Electrical energy produced or generated from cogeneration as defined in RCW 82.35.020; and

(ii) Electrical energy or gas produced or generated from renewable energy resources such as solar energy, wind energy, hydroelectric energy, geothermal energy, wood, wood wastes, municipal wastes, agricultural products and wastes, and end-use waste heat; and

(b) Those amounts expended to improve consumers' efficiency of energy end use or to otherwise reduce the use of electrical energy or gas by the consumer.

(2) This section applies ((~~only~~)) to new facilities for the production or generation of energy from cogeneration or renewable energy resources or measures to improve the efficiency of energy end use on which construction or installation is begun after June 12, 1980, and before January 1, 1990.

(3)(a) In addition, this section applies to new or expanded cogeneration from a facility on which construction or installation is begun after June 30, 2001, and before January 1, 2011.

(b) For purposes of this subsection, the following definitions apply:

(i) "Cogeneration facility" means any machinery, equipment, structure, process, or property, or any part thereof, installed or acquired by a person or corporation for the purpose of the sequential generation, in either order, of electrical energy and useful thermal energy, such as heat or steam, from the same primary energy source or fuel in which the useful thermal energy is used:

(A) For a manufacturing process;

(B) To improve the operating efficiency of a facility that produces electrical energy through biomass generation as defined in RCW 19.29A.010; or

(ii) "Expanded cogeneration" means the amount of electrical energy produced for sale at a facility that exceeds the amount of electrical energy sold on an average annual basis in the three years prior to June 30, 2001.

(i) A cogeneration facility fueled by diesel; or

(ii) A cogeneration facility that has a combined fuel conversion efficiency of less than sixty percent, unless the cogeneration facility is used to improve the operating efficiency of a facility that produces electrical energy through biomass generation as defined in RCW 19.29A.010, in which case this subsection shall apply unless the cogeneration facility has a combined fuel conversion efficiency of less than forty percent.

(d) By August 25th of each fiscal year in which a taxpayer intends to claim the deduction under this subsection, the taxpayer shall file with the department, on a form and in a manner prescribed by the department, the following information concerning production at the cogeneration facility during the previous twelve months:

(i) The amount of fuel consumed;

(ii) The energy content of the fuel measured in British thermal units per unit of fuel;

(iii) The amount of electricity produced measured in kilowatt hours;

(iv) The gallons of hot water or pounds of steam produced;

(v) The temperature of the hot water, or temperature and pressure of the steam, produced; and

(vi) The temperature of the hot water or condensate returned to the boiler.

(e) The department may disclose information received under (d)(i) through (vi) of this subsection to energy policy staff of the department of community, trade, and economic development or the Washington State University cooperative extension solely for the purpose of determining a taxpayer's eligibility for a deduction under this subsection. In addition, prior to the time a cogeneration facility has operated for a full fiscal year, the department may require such information that it finds necessary to determining a taxpayer's eligibility under this subsection, and may disclose the information received to energy policy staff of the department of community, trade, and economic development or the Washington State University cooperative extension solely for the purpose of determining the taxpayer's eligibility for a deduction under this subsection.

(4) Deductions under subsection (1)(a) of this section shall be allowed for a period not to exceed thirty years after the project is placed in operation.

((~~(4)~~)) (5) Measures or projects encouraged under this section shall at the time they are placed in service be reasonably expected to save, produce, or generate energy at a total incremental system cost per unit of energy delivered to end use which is less than or equal to the incremental system cost per unit of energy delivered to end use from similarly available conventional energy resources which utilize nuclear energy or fossil fuels and which the gas or electric utility could acquire to meet energy demand in the same time period.

((~~(5)~~)) (6) The department of revenue, after consultation with the utilities and transportation commission in the case of investor-owned utilities and the governing bodies of locally regulated utilities, shall determine the eligibility of individual projects and measures for deductions under this section.

III. PROMOTING NEW CLEAN TECHNOLOGIES FOR ENERGY

PRODUCTION AND DEMAND MANAGEMENT

NEW SECTION. Sec. 301. A new section is added to chapter 19.29A RCW to read as follows:

(1) Beginning January 1, 2002, each electric utility must provide to its retail electricity customers a voluntary option to purchase qualified renewable energy resources in accordance with this section.

(2) Each electric utility must include on its retail electric customer's regular billing statements a voluntary option to purchase qualified renewable energy resources. The option may allow customers to purchase qualified renewable energy resources at fixed or variable rates and for fixed or variable periods of time. A utility may provide qualified renewable energy resource options through either: (a) Resources it owns or contracts for; or (b) the purchase of credits issued by a clearinghouse or other system by which the utility may secure, for trade or other consideration, verifiable evidence that a second party has developed a qualified renewable energy resource and that the second party agrees to transfer such evidence exclusively to the credit of the utility.

(3) For the purposes of this section, a "qualified renewable energy resource" means the electricity produced from generation facilities initiating operations after January 1, 2001, that are fueled by: (a) Wind; (b) solar energy; (c) geothermal energy; (d) landfill gas; (e) wave or tidal action; (f) gas produced during the treatment of wastewater; (g) environmentally qualified hydropower, as defined in RCW 82.08.02567; (h) fuel cells, as defined in RCW 82.08.02567; or (i) biomass energy based on solid organic fuels from wood, forest, or field residues, or dedicated energy crops that do not include wood pieces that have been treated with chemical preservatives such as creosote, pentachlorophenol, or copper‑chrome‑arsenic.

(4) The rates, terms, conditions, and customer notification of each utility's option or options offered in accordance with this section must be approved by the governing body of the consumer-owned utility or by the commission for investor-owned utilities.

(5) Each consumer-owned utility must report to the department and each investor-owned utility must report annually to the commission beginning October 1, 2002, until October 1, 2012, describing the option or options it is offering its customers under the requirements of this section, the rate of customer participation, the amount of qualified renewable energy resources purchased by customers, and the amount of utility investments in qualified renewable energy resources. The department and the commission together shall report annually to the legislature, beginning December 1, 2002, until December 1, 2012, with the results of the utility reports.

Sec. 302. RCW 19.29A.040 and 1998 c 300 s 6 are each amended to read as follows:

The provisions of RCW 19.29A.020, 19.29A.030, ((~~and~~)) section 5, chapter 300, Laws of 1998, and section 301 of this act do not apply to a small utility. However, nothing in this section prohibits the governing body of a small utility from determining the utility should comply with any or all of the provisions of RCW 19.29A.020, 19.29A.030, ((~~and~~)) section 5, chapter 300, Laws of 1998, and section 301 of this act, which governing bodies are encouraged to do.

Sec. 303. RCW 82.08.02567 and 1999 c 358 s 4 are each amended to read as follows:

(1) The tax levied by RCW 82.08.020 shall not apply to sales of machinery and equipment used directly in generating electricity using fuel cells, environmentally qualified hydropower, wind, sun, or landfill gas as the principal source of power, or to sales of or charges made for labor and services rendered in respect to installing such machinery and equipment, but only if the purchaser develops with such machinery, equipment, and labor a facility capable of generating not less than two hundred ((~~kilowatts~~)) watts of electricity and provides the seller with an exemption certificate in a form and manner prescribed by the department ((~~by rule~~)). The seller shall retain a copy of the certificate for the seller's files.

(2) For purposes of this section and RCW 82.12.02567:

(a) "Landfill gas" means biomass fuel of the type qualified for federal tax credits under 26 U.S.C. Sec. 29 collected from a landfill. "Landfill" means a landfill as defined under RCW 70.95.030;

(b) "Machinery and equipment" means industrial fixtures, devices, and support facilities that are integral and necessary to the generation of electricity using wind, sun, environmentally qualified hydropower, or landfill gas as the principal source of power;

(c) "Machinery and equipment" does not include: (i) Hand-powered tools; (ii) property with a useful life of less than one year; (iii) repair parts required to restore machinery and equipment to normal working order; (iv) replacement parts that do not increase productivity, improve efficiency, or extend the useful life of machinery and equipment; (v) buildings; or (vi) building fixtures that are not integral and necessary to the generation of electricity that are permanently affixed to and become a physical part of a building;

(d) Machinery and equipment is "used directly" in generating electricity with fuel cells or by wind energy, environmentally qualified hydropower, solar energy, or landfill gas power if it provides any part of the process that captures the energy of the wind, sun, or landfill gas, converts that energy to electricity, and stores, transforms, or transmits that electricity for entry into or operation with electric transmission and distribution systems;

(e) "Fuel cell" means a technology involving an electrochemical reaction that generates electricity by combining atoms of hydrogen and oxygen in the presence of a catalyst;

(f) "Environmentally qualified hydropower" means (i) the additional energy produced by existing hydropower facilities that have been modernized or upgraded after June 1, 1998, to increase capacity or efficiency; or (ii) energy produced by run-of-the-river or run-of-the-canal hydropower facilities that are not responsible for obstructing the passage of anadromous fish.

(3) This section expires June 30, ((~~2005~~)) 2009.

Sec. 304. RCW 82.12.02567 and 1999 c 358 s 10 are each amended to read as follows:

(1) The provisions of this chapter shall not apply with respect to machinery and equipment used directly in generating not less than two hundred ((~~kilowatts~~)) watts of electricity using wind, sun, or landfill gas as the principal source of power.

(2) The definitions in RCW 82.08.02567 apply to this section.

(3) This section expires June 30, ((~~2005~~)) 2009.

NEW SECTION. Sec. 305. A new section is added to chapter 82.08 RCW to read as follows:

The tax levied by RCW 82.08.020 does not apply to sales of smart metering technology purchased after July 1, 2003, by an electric utility as defined in RCW 80.60.010, up to a selling price of fifty dollars per utility customer to be served by the technology. For the purposes of this section, "smart metering technology" means equipment, including specialized meters, that provide two‑way electronic communication between the utility and a residential customer's electric meter or electric appliances, and that will enable the utility to charge different rates during different times of the day to encourage a shifting of residential customers' demand in order to minimize peak demand. By December 1, 2001, the utilities and transportation commission shall provide information to the department and to the electric utility in regard to how many residential customers are being served by smart metering technology on June 30, 2001, and how many additional residential customers will be served by application of the smart metering technology after July 1, 2001.

This section expires June 30, 2007.

NEW SECTION. Sec. 306. A new section is added to chapter 82.12 RCW to read as follows:

This chapter does not apply in respect to smart metering technology purchased after July 1, 2003, by an electric utility as defined in RCW 80.60.010, up to a selling price of fifty dollars per utility customer to be served by the technology. For the purposes of this section, "smart metering technology" means equipment, including specialized meters, that provide two‑way electronic communication between the utility and a residential customer's electric meter or electric appliances, and that will enable the utility to charge different rates during different times of the day to encourage a shifting of residential customers' demand in order to minimize peak demand.

This section expires June 30, 2007.

IV. MISCELLANEOUS

NEW SECTION. Sec. 401. Part headings used in this act are not any part of the law.

NEW SECTION. Sec. 402. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 403. This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately.