BILL REQ. #:  H-3529.4 

Read first time 01/14/2004.   Referred to Committee on Technology, Telecommunications & Energy.

     AN ACT Relating to an energy resource portfolio standard; amending RCW 82.08.02567 and 82.12.02567; adding a new section to chapter 82.16 RCW; adding a new section to chapter 82.08 RCW; adding a new chapter to Title 80 RCW; and providing expiration dates.

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

NEW SECTION.  Sec. 1   The legislature finds and declares that:
     (1) Washington's utilities have been historical leaders in developing cost-effective renewable hydropower energy and investing in cost-effective energy efficiency, and the state economy has greatly benefited from the strong foundation of low-cost hydropower generation as well as forward-looking investments in energy efficiency, that have stimulated economic development, reduced operating costs for businesses, made industries more competitive, made homes more comfortable and efficient, reduced the energy burden of low-income households, and protected the environment;
     (2) The western energy crisis of 2000-2001 demonstrated the vulnerability of an energy system reliant on transmission of electricity from distant load centers, increasingly strained water resources, and natural gas impacted by volatile market prices;
     (3) Washington electric ratepayers benefit from resource planning and acquisition that hedges against future fuel price risk by assisting utilities in developing a diverse portfolio of resources to meet customer needs;
     (4) Fuel diversity, economic, and environmental benefits from renewable energy and efficiency resources accrue to the public at large, and therefore all consumers and utilities should support consistent development of these resources to meet the state's electric demand and stabilize electricity prices through tax incentives for renewable resource and energy efficiency investments.

Sec. 2   RCW 82.08.02567 and 2001 c 213 s 1 are each amended to read as follows:
     (1) The tax levied by RCW 82.08.020 ((shall)) does not apply to sales of machinery and equipment used directly in generating electricity using fuel cells, 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)) another eligible renewable resource, except a dedicated resource, but only if the purchaser:
     (a) Develops with ((such)) the machinery, and equipment((, and labor)) a facility capable of generating not less than two hundred watts of electricity and;
     (b) Provides the seller with an exemption certificate in a form and manner prescribed by the department, and the department with a duplicate of the certificate or a summary of exempt sales as the department may require; and
     (c) If the purchaser is an electric utility, has entered into an agreement with the department of revenue under section 5 or 6 of this act. 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, or landfill gas as the principal source of power((;
     (c) "Machinery and equipment")) or other renewable resources; but 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))) (c) Machinery and equipment is "used directly" in generating electricity ((with)) by a fuel cell((s)) or by wind energy, solar energy, ((or)) landfill gas power, or another eligible renewable resource if it provides any part of the process that captures the energy of the wind, sun, ((or)) landfill gas or from another renewable resource, converts that energy to electricity, and stores, transforms, or transmits that electricity for entry into or operation in parallel with electric transmission and distribution systems;
     (((e))) (d) "Fuel cell" means an electrochemical reaction that generates electricity by combining atoms of hydrogen and oxygen in the presence of a catalyst and does not use hydrogen that is reformed on-site from a fossil fuel.
     (e) "Electric utility" has the meaning in section 4 of this act.
     (f) "Eligible renewable resource" has the meaning in section 4 of this act.
     (g) "Renewable resource" has the meaning in section 4 of this act.
     (h) "Dedicated resource" has the meaning in section 4 of this act.
     (3) The department of revenue, after consultation with the utilities and transportation commission in the case of electrical companies and the department of community, trade, and economic development in the case of consumer-owned utilities, determines the eligibility of individual projects and measures for deductions under this section and compliance with sections 5 and 6 of this act.
     (4) This section expires June 30, ((2009)) 2023.

Sec. 3   RCW 82.12.02567 and 2003 c 5 s 6 are each amended to read as follows:
     (1) The provisions of this chapter ((shall)) do not apply with respect to machinery and equipment used directly in generating not less than two hundred watts of electricity using wind, sun, or landfill gas as the principal source of power, or ((to the use of labor and services rendered in respect to installing such machinery and equipment)) from a fuel cell or eligible renewable resource other than a dedicated resource, if the user provides the department with:
     (a) An exemption certificate in a form and manner prescribed by the department within sixty days of the first use of the machinery and equipment in this state; or
     (b) An annual summary listing the machinery and equipment by January 31st of the year following the calendar year in which the machinery and equipment is first used in this state; and
     (c) If the user is an electric utility, has entered into a renewable energy acquisition agreement with the department of revenue under section 5 or 6 of this act.
     (2) The definitions in RCW 82.08.02567 apply to this section.
     (3) The department of revenue, after consultation with the utilities and transportation commission in the case of electrical companies and the department of community, trade, and economic development in the case of consumer-owned utilities, determines the eligibility of individual projects and measures for deductions under this section and compliance with sections 5 and 6 of this act.
     (4) This section expires June 30, ((2009)) 2023.

NEW SECTION.  Sec. 4   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Agreement effective date" means the calendar year in which an electric utility begins to acquire electrical energy or capacity under a renewable energy acquisition agreement with the department of revenue.
     (2) "Base year" means the calendar year in which an electric utility entered into an energy efficiency acquisition agreement with the department of revenue.
     (3) "Cogeneration" means 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 in a manufacturing process, space heating, or cooling.
     (4) "Cogeneration facility" means any machinery, equipment, structure, process, or property, or any part thereof, installed or acquired for the purpose of cogeneration.
     (5) "Commission" means the Washington state utilities and transportation commission.
     (6) "Conservation" means any reduction in electric power consumption as a result of increases in the efficiency of energy use, production, transmission, or distribution without reducing the level of energy service.
     (7) "Consumer-owned utility" includes a municipality, public utility district, irrigation district, cooperative association, port district, or water-sewer district engaged in the business of distributing electricity to one or more retail electric customers in the state.
     (8) "Conventional resource" means hydroelectric generation, natural gas generation, or coal generation, as defined in RCW 19.29A.010.
     (9) "Cooperative association" means a cooperative association or mutual corporation or association organized under chapter 23.86 or 24.06 RCW.
     (10) "Cost-effective" has the meaning in RCW 80.52.030.
     (11) "Dedicated resource" means a qualified conventional resource used by an electric utility to shape and firm electrical output from an eligible renewable resource so that resource will mimic the capacity factor and operational characteristics of a combined cycle combustion turbine. A dedicated resource includes a stated quantity of electric generation capacity or energy tied directly to a specific generation facility or set of facilities either through ownership or contractual purchase, or a contractual right to a stated quantity of electric generation capacity or energy from a specific generation facility or set of facilities. A dedicated resource is an eligible renewable resource under this chapter only for the amount of electrical capacity used to shape and firm the electrical output of an eligible renewable resource that is not a qualified conventional resource.
     (12) "Department" means the department of community, trade, and economic development.
     (13) "Electric utility" means any electrical company or consumer-owned utility.
     (14) "Electrical company" means a company that meets the definition in RCW 80.04.010 and is owned by investors.
     (15) "Eligible net-metered generation" means an electricity generation system that meets the criteria of a net metering system as defined in RCW 80.60.010 and uses as its fuel a renewable resource.
     (16) "Eligible renewable resources" means a renewable resource that supplies electricity to electric utilities in Washington from the following:
     (a) A nonhydropower renewable resource that began operation after April 1, 1999, and any subsequent additions to those facilities;
     (b) Additional power produced, above original design specifications, by hydropower facilities that were operating on April 1, 1999, are located in the Pacific Northwest, and that were improved or upgraded after April 1, 1999, to increase capacity or efficiency;
     (c) Hydropower facilities that operate with a head of twenty meters or less and that began operation after April 1, 1999;
     (d) Additions to hydropower generating capacity operating on April 1, 1999, in irrigation pipes and canals located in the Pacific Northwest, that result from upgrades or improvements made after April 1, 1999, and do not result in any new water diversions;
     (e) Dedicated resources;
     (f) Eligible net-metered generation; or
     (g) High-efficiency cogeneration.
     (17) "Full requirements consumer-owned utility" means a consumer-owned utility that has contracted with the Bonneville Power Administration for resources sufficient to meet its firm power load.
     (18) "Governing body" means the board of directors, council, commission, or board that is legally responsible for the management of a consumer-owned utility.
     (19) "High efficiency cogeneration" means a cogeneration facility that achieves at least a doubling of previous energy resource utilization by the facility owner or operator, or that has a combined fuel conversion efficiency of at least eighty percent.
     (20) "Incremental retail load growth" means an electric utility's forecasted retail load growth to serve retail electric customers in Washington for any twenty-five year period beginning after April 1, 1999.
     (21) "Irrigation district" means a district formed under chapter 87.03 RCW.
     (22) "Low income" means a household meeting the income eligibility guidelines determined by the department.
     (23) "Low-income energy efficiency services" include energy-related repairs, weatherization, installation of energy-efficient appliances and fixtures for low-income residences, and investment in new construction of low-income households that exceed the state energy code, as well as energy education, for the purpose of enhancing energy efficiency.
     (24) "Municipality" means a city or town that is authorized to own or operate an electric utility under chapter 35.92 RCW.
     (25) "New eligible renewable resource" means a nonhydropower renewable resource that began operation after July 1, 2004, and any subsequent additions to those facilities.
     (26) "Pacific Northwest" has the meaning in section 3 of the Pacific Northwest electric power planning and conservation act, P.L. 96-501 (16 U.S.C. Sec. 389a; 94 Stat. 2698).
     (27) "Port district" means a port district within which an industrial development district has been established as authorized by Title 53 RCW.
     (28) "Public utility district" means a district formed under chapter 54.04 RCW.
     (29) "Qualified conventional resource" means (a) qualified hydropower; or (b) natural gas generation, as defined in RCW 19.29A.010, that has mitigated its emissions of carbon dioxide pursuant to the laws of this or any other state in the Pacific Northwest.
     (30) "Qualified hydropower" means (a) a hydropower generating facility that has been issued a license by the federal energy regulatory commission pursuant to the federal power act (16 U.S.C. Sec. 791 et seq.) after enactment of the electric consumers protection act of 1986, P.L. 99-495, which afforded equal consideration to power and nonpower values in the determination of the federal energy regulatory commission of whether or not to issue a license for a hydropower project; and (b) firming and shaping products purchased from a federal power marketing agency and supported by hydropower facilities owned and operated by agencies of the federal government.
     (31) "Renewable energy credit" means a tradable certificate of proof of one megawatt-hour of electricity generated from a tradable renewable resource if the credit is obtained after July 1, 2001.
     (32) "Renewable resources" means electricity generation facilities fueled by: (a) Water; (b) wind; (c) hydrogen; (d) solar energy; (e) geothermal energy; (f) landfill gas; (g) biomass energy based on animal waste or solid organic fuels from wood, forest, or field residues, or dedicated energy crops that do not include wood pieces treated with chemical preservatives such as creosote, pentachlorophenol, or copper-chrome-arsenic; (h) wave or tidal action; or (i) gas from sewage treatment facilities.
     (33) "Retail electric customer" means a person or entity in Washington that purchases electricity for ultimate consumption and not for resale.
     (34) "Retail load" means the number of kilowatt-hours of electricity delivered by an electric utility to its Washington retail customers.
     (35) "Small utility" means a small utility as defined in RCW 19.29A.010.
     (36) "Tradable renewable resource" means: (a) An eligible renewable resource other than a dedicated resource; and (b) any nonhydropower renewable resource located within the jurisdiction of the western energy coordinating council, or its successor entity, that commenced operation or made additions to the facilities after April 1, 1999.
     (37) "Water-sewer district" means a district formed under Title 57 RCW.

NEW SECTION.  Sec. 5   (1) To claim a tax deduction or exemption under RCW 82.08.02567, 82.12.02567, or section 7 (1) or (2) of this act an electric utility must enter into a renewable energy acquisition agreement with the department of revenue and comply with the requirements of this section.
     (2)(a) Before entering into an agreement with the department of revenue, an electric utility must prepare a prospective incremental load growth forecast for a twenty year period. An electrical company must prepare and update its forecast pursuant to rules adopted by the commission. A consumer-owned utility must prepare and update its forecast pursuant to rules adopted by the department. The department shall develop guidelines for, and provide assistance to, full requirements consumer-owned utilities in the development of the incremental load forecasts required under this subsection. The purpose of the guidelines and assistance is to reduce the administrative burden of preparing the forecasts. These guidelines may provide for load forecasting by small utilities that relies on historical load growth.
     (b) An electric utility must conduct a resource cost analysis before it acquires any new eligible renewable resource under a renewable energy acquisition agreement with the department of revenue. When an electric utility initiates a process to acquire electric generation capacity or energy, the electric utility must quantify the cost of new conventional resources and the cost of new eligible renewable resources to determine the availability of cost-effective new renewable resources. To quantify the costs of these resources, an electric utility may either identify the cost of developing the resources itself, or issue a request for proposals to identify the market cost of new conventional resources and new eligible renewable resources. Full requirements consumer-owned utilities may use the published rates of the Bonneville Power Administration for firm supplies as a substitute for the cost analysis required for new conventional resources.
     (c) The cost analysis must identify for a period of at least twenty years: (i) All costs associated with owning and operating new conventional resources and new eligible renewable resources, and purchasing the resources through contract; (ii) all costs associated with integrating a new eligible renewable resource within the utility's system including, but not limited to, shaping and firming the resource, if necessary; (iii) the cost or value of transmission capacity or rights needed to convey electrical energy from a new conventional resource or new eligible renewable resource to the contractual or operational point of delivery onto the utility's distribution system; and (iv) the estimated value of tax incentives available under RCW 82.08.02567, 82.12.02567, or section 7 (1) or (2) of this act.
     (d) If the cost analysis shows that the cost of the lowest cost new eligible renewable resource, without considering the estimated value of tax incentives under RCW 82.08.02567, 82.12.02567, or section 7 (1) or (2) of this act, is less than or equal to the cost of the lowest cost new conventional resource, then the tax incentives under RCW 82.08.02567, 82.12.02567, or section 7 (1) or (2) of this act are not available to the electric utility for the acquisition of the new eligible renewable resource. Even though a new eligible renewable resource may not qualify for the tax incentives under RCW 82.08.02567, 82.12.02567, or section 7 (1) or (2) of this act, the new eligible renewable resource, if acquired by the electric utility, will still count toward the renewable energy standard in this section.
     (e) The commission, in the case of an investor-owned utility, and the department, in the case of a consumer-owned utility, shall adopt comparable rules to govern the cost analysis, including, but not limited to, criteria under which the results of the analysis will be verified by the commission and the department.
     (4) An electric utility that enters into a renewable energy acquisition agreement with the department of revenue under this section is subject to the following renewable energy standard:
     (a) Within five years of the agreement's effective date, the utility must acquire on an annual average an amount of electric generation capacity or energy from eligible renewable resources, or renewable energy credits equivalent to fifteen percent of its incremental retail load growth, if the utility has forecasted any incremental growth load.
     (b) Within ten years of the agreement's effective date, the utility must acquire on an annual average an amount of electric generation capacity or energy from eligible renewable resources, or renewable energy credits equivalent to twenty-five percent of its incremental retail load growth, if the utility has forecasted any incremental growth load.
     (c) Within fifteen years of the agreement's effective date, the utility must acquire on an annual average an amount of electric generation capacity or energy from eligible renewable resources, or renewable energy credits equivalent to thirty-five percent of its incremental retail load growth, if the utility has forecasted any incremental growth load.
     (5) An eligible renewable resource acquired by an electric utility between April 1, 1999, and the agreement's effective date counts toward the renewable energy standard.
     (6) Nothing in this section limits an electric utility from exceeding the renewable energy standard under this section. Nothing in this section requires an electric utility to have any forecasted incremental load growth to enter into a renewable energy acquisition agreement under this section.
     (7) No electrical company may purchase eligible renewable resources through contract from an affiliated interest of the electrical company as defined in RCW 80.16.010 unless it has issued a request for proposals from other suppliers based upon the same terms and conditions that would apply to a contract with an affiliated interest and the commission determines the proposal from its affiliated interest is the lowest cost option.
     (8) The commission, in the case of an electrical company, and the department, in the case of a consumer-owned utility, determines the date by which an electric utility is deemed to begin to acquire electric generation capacity for the purpose of subsection (3) of this section.
     (9) If at any time after an agreement's effective date, the utility determines that an insufficient amount of cost-effective renewable resources is available for it to comply with the renewable energy standard in this section, the utility may petition the commission, in the case of an electrical company, or the department, in the case of a consumer-owned utility, for a lesser renewable energy standard which may be applied retroactively. The lesser standard adopted under this subsection must take into account results of any and all cost analyses conducted by an electric utility under this section. The department of revenue must amend its agreement with the affected electric utility to reflect any change made to the utility's renewable energy standard.
     (10) The commission has sole authority to approve criteria, program implementation guidelines and schedules, and goals for electrical companies.

NEW SECTION.  Sec. 6   (1) To claim a tax deduction under section 7(3) of this act, an electric utility must enter into an energy efficiency acquisition agreement with the department of revenue and comply with the energy efficiency standard of this section.
     (2) Before entering into an energy efficiency acquisition agreement with the department of revenue, an electric utility must calculate the amount it expended on energy efficiency programs in 2003 and quantify, as may be practicable, the amount of energy savings achieved by those expenditures as a percentage of the utility's retail electric load in 2003.
     (3) The following baseline energy efficiency standard is established:
     (a) Within five years of entering into an agreement with the department of revenue, the electric utility must on average annually acquire cost-effective electricity savings directly attributable to conservation programs serving its Washington retail electric customers sufficient to meet an amount equal to seventy-five one-hundredths of one percent of the utility's base year retail load. After five years from the utility's base year, the electricity savings acquired from the conservation programs implemented during the preceding five-year period must equal at least three and seventy-five one-hundredths of one percent of the utility's base year retail load.
     (b) Within ten years of the utility's base year, the utility must on average annually acquire cost-effective electricity savings directly attributable to conservation programs serving its Washington retail electric customers sufficient to meet an amount equal to eighty-five one-hundredths of one percent of the utility's retail load in the five years after the base year. After ten years of the base year, the electricity savings acquired from the conservation programs implemented during the preceding three-year period will meet at least two and fifty-five one-hundredths of one percent of the utility's retail load in the year five years after the base year.
     (c) The utility must continue to comply with the standard established in (b) of this subsection for each subsequent three-year period.
     (d) The amount of conservation the utility needs to acquire to meet the standard will be based on that utility's base year retail load.
     (4) Before entering into an energy efficiency acquisition agreement, an electric utility may petition the commission, in the case of an electrical company, or the department, in the case of a consumer-owned utility, for the establishment of a lesser energy efficiency standard to that provided under subsection (3) of this section. The commission and department will establish a lesser energy efficiency standard based upon a showing that a lower standard is more appropriate for the unique load characteristics of the electric utility. An alternative energy efficiency standard established under this subsection for an electric utility shall be incorporated into the utility's energy efficiency acquisition agreement with the department of revenue.
     (5) Nothing in this section limits an electric utility from exceeding the energy efficiency standard under this section.
     (6) The utility must meet at least five percent of its annual energy efficiency standard requirement under this section with low-income energy efficiency services, unless it can demonstrate to the commission in the case of an electrical company or the department in the case of a consumer-owned utility that sufficient cost-effective opportunities do not exist within its service territory for conserving energy in low-income households.
     (7) The utility must pursue energy conservation opportunities in each customer class to achieve energy savings that are not independently captured by consumer acquisition and that are economically feasible for consumers, taking into account incentives provided by the utility. All energy savings resulting from appropriately targeted energy efficiency programs shall be applied towards satisfying the energy efficiency standard. The portfolio of energy conservation programs used to meet the efficiency standard must be cost-effective. A conservation program implemented by an electrical company is cost-effective if it passes the total resource cost test as defined by the commission.
     (8) The utility must use practices generally accepted in the Pacific Northwest to measure accrued energy savings from conservation, including monitoring and verification of those savings.
     (9) In meeting the energy efficiency standard, the utility may count conservation even if it also receives credit or funding for that conservation from the Bonneville Power Administration.
     (10) An electric utility contributing to the northwest energy efficiency alliance on its own or through its Bonneville Power Administration rates may count its share of annual accrued energy savings as determined by the northwest energy efficiency alliance towards the energy efficiency standard under this section. The credit taken under this subsection may not exceed twenty percent of the utility's annual energy efficiency standard requirement.
     (11)(a) For electrical companies, the commission must develop criteria for cost-effective conservation that qualifies toward the energy efficiency standard and program implementation guidelines, including verifying and monitoring savings. The commission must consider all existing and appropriate criteria and guidelines where applicable, and may rely on work of regional power planning committees in determining criteria and guidelines.
     (b) For consumer-owned utilities, the department must develop criteria for cost-effective conservation that qualifies toward the energy efficiency standard and program implementation guidelines, including verifying and monitoring savings. The department must consider all existing and appropriate criteria and guidelines where applicable, and may rely on work of regional power planning committees in determining criteria and guidelines.
     (12) If an electric utility can demonstrate to the commission in the case of an electrical company or the department in the case of a consumer-owned utility that it is unable to meet the energy efficiency standard created under this section due to a lack of sufficient opportunities for acquiring cost-effective conservation, the commission or department will adopt a lesser standard for the utility. The lesser standard may be retroactive.

NEW SECTION.  Sec. 7   A new section is added to chapter 82.16 RCW to read as follows:
     (1) In computing the tax under this chapter, a light and power business may deduct from gross income an amount equal to:
     (a) The cost of production of electrical energy produced or generated from an eligible renewable resource other than a dedicated resource, built and owned by a light and power business on or after July 1, 2004, and used for consumption within the state;
     (b) The amount paid by a light and power business to purchase energy or capacity from an eligible renewable resource other than a dedicated resource, by contract entered into after July 1, 2004, and used for consumption within the state; and
     (c) The amount paid by a light and power business to purchase renewable energy credits after July 1, 2001.
     (2) In computing the tax under this chapter, a light and power business may deduct from gross income an amount equal to the cost or value of transmission capacity or rights acquired by the business after July 1, 2004, and needed to convey electrical energy from an eligible renewable resource to the contractual or operational point of delivery into the distribution system of the light and power business.
     (3) In computing the tax under this chapter, a light and power business may deduct from gross income an amount equal to amounts expended, less an amount equal to the amount expended by the light and power business in the base year of the agreement, to improve consumers' efficiency of energy end use or to otherwise reduce the use of electrical energy or gas by the consumer.
     (4) Deductions under subsection (1) of this section are allowed for a period not more than thirty years after the project is placed in operation.
     (5) For the purpose of this section:
     (a) When a light and power business purchases renewable energy by contract, "the cost of production at the plant" means the purchase price for electrical energy or capacity under the contract;
     (b) "Renewable energy credit" has the meaning in section 4 of this act;
     (c) "Eligible renewable resource" has the meaning in section 4 of this act; and
     (d) "Dedicated resource" has the meaning in section 4 of this act.
     (6) The department of revenue, after consultation with the utilities and transportation commission in the case of electrical companies and the department of community, trade, and economic development in the case of consumer-owned utilities, determines the eligibility of individual projects and measures for deductions under this section. No light and power business may take a deduction under this section unless it has entered into a renewable energy acquisition agreement or energy efficiency acquisition agreement with the department of revenue.
     (7) No new deduction may be taken under this section after June 30, 2023.
     (8) This section expires July 1, 2023.

NEW SECTION.  Sec. 8   (1)(a) An electric utility may receive additional credit toward meeting the renewable energy standard under section 5 of this act and may claim an additional tax exemption under section 9 of this act if it acquires eligible renewable resources other than dedicated resources, physically located in Washington state if:
     (i) Construction began after December 31, 2003; and
     (ii) The electric utility purchased or contracted for the eligible renewable resource by December 31, 2007.
     (b) An electric utility that acquires energy from an eligible renewable resource that meets the criteria of this section may count that resource above its base value in meeting the renewable energy standard as follows:
     (i) Energy purchased or contracted by December 31, 2004, can be counted at one and one-tenth times its base value;
     (ii) Energy purchased or contracted by December 31, 2005, can be counted at one and nine-hundredths times its base value;
     (iii) Energy purchased or contracted by December 31, 2006, can be counted at one and eight-hundredths times its base value; or
     (iv) Energy purchased or contracted by December 31, 2007, can be counted at one and seven-hundredths times its base value.
     (2)(a) An electric utility may receive additional credit toward meeting the renewable energy standard if it acquires eligible renewable resources other than dedicated resources, physically located in Washington state or renewable energy credits from an eligible renewable resource physically located in Washington state if:
     (i) Construction began after December 31, 2003; and
     (ii) The renewable energy developer used apprenticeship programs during construction of the eligible renewable resources.
     (b) The apprenticeship programs must be approved by the apprenticeship council under its authority in chapter 49.04 RCW, and minimum levels of apprenticeship programs must be:
     (i) Ten percent of total labor hours for projects beginning construction after December 31, 2007;
     (ii) Twelve and one-half percent of total labor hours for projects beginning construction after December 31, 2014; and
     (iii) Fifteen percent of total labor hours for projects beginning construction after December 31, 2021.
     (c) The apprenticeship council will determine compliance with (b) of this subsection.
     (d) An electric utility that acquires energy or renewable energy credits from an eligible renewable resource other than a dedicated resource that meets the criteria under this subsection may count that resource at one and two-tenths times its base value in meeting the renewable energy standard.

NEW SECTION.  Sec. 9   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 labor or services rendered in respect to installing machinery and equipment used directly in generating electricity from a fuel cell or eligible renewable resource other than a dedicated resource, but only if the purchaser has entered into a renewable energy acquisition agreement with the department of revenue as provided in section 5 of this act, develops with the labor a facility capable of generating at least two hundred kilowatts of electricity and provides the seller with an exemption certificate in a form and manner prescribed by the department by rule, and the purchaser provides the department with a duplicate of the certificate or a summary of exempt sales as the department may require. The seller shall retain a copy of the certificate for the seller's files.
     (2) For the purposes of this section:
     (a) "Eligible renewable resource" has the meaning in section 4 of this act.
     (b) "Electric utility" has the meaning in section 4 of this act.
     (c) "Fuel cell" has the meaning in RCW 82.08.02567.
     (d) "Machinery and equipment" has the meaning in RCW 82.08.02567.
     (e) "Renewable resource" has the meaning in section 4 of this act.
     (f) "Dedicated resource" has the meaning in section 4 of this act.
     (3) This section expires June 30, 2023.

NEW SECTION.  Sec. 10   An electric utility may receive credit towards meeting the energy efficiency or renewable energy standards under this chapter when it also receives credit or funding for those same resources under an energy efficiency or renewable energy standard established by federal legislation. However, an electric utility may not receive credit towards meeting the energy efficiency or renewable energy standards when it also receives credit or funding for those same resources under an energy efficiency or renewable energy standard established by legislation in another state.

NEW SECTION.  Sec. 11   (1) The department may adopt rules applicable to consumer-owned utilities for the purposes of: (a) Verifying load resource balance; (b) verifying a lack of sufficient opportunities for cost-effective renewable resources; (c) verifying a lack of sufficient opportunities for cost-effective conservation; (d) establishing a lesser renewable energy standard; (e) establishing a lesser energy efficiency standard; (f) determining the cost-effectiveness of eligible renewable resources; and (g) verifying compliance with the renewable energy and energy efficiency standards.
     (2) The commission may adopt rules applicable to electrical companies for the purposes of: (a) Verifying load resource balance; (b) verifying a lack of sufficient opportunities for cost-effective renewable resources; (c) verifying a lack of sufficient opportunities for cost-effective conservation; (d) establishing a lesser renewable energy standard; (e) establishing a lesser energy efficiency standard; (f) determining the cost-effectiveness of eligible renewable resources; and (g) verifying compliance with the renewable energy and energy efficiency standards.
     (3) Any rules adopted pursuant to this section must be adopted before an electric utility may enter into an agreement with the department of revenue under sections 5 and 6 of this act.
     (4) The department must convene a group of stakeholders, including the commission, to advise it on the establishment of a new or selection of an existing system of renewable energy credits that may be used to comply with the renewable energy standard under section 5 of this act. The department will consider all existing and appropriate systems and organizations that facilitate renewable energy credit trading westernwide or nationally.

NEW SECTION.  Sec. 12   (1) On or before June 1, 2008, and annually thereafter, an electric utility that has entered into an agreement under section 5 or 6 of this act must demonstrate progress in meeting the energy efficiency and renewable energy standards in this chapter for the annual period ending the previous December 31st. The department and commission may share this information with each other. Each report must include at least the following: (a) The amount of electricity generated or acquired from eligible renewable resources; (b) the amount of renewable energy credits acquired, sold, or traded; (c) the annual retail load for an electric utility or the annual electricity consumption data; and (d) the amount of conservation annually acquired. Each electrical company will report to the commission and each consumer-owned utility will report to the department.
     (2) Reports submitted to the commission and department shall also be provided to the department of revenue, which may conduct an independent audit of the records submitted by electric utilities.
     (3) On or before December 1, 2010, and biennially thereafter, the department and commission shall submit a report to the legislature on the accomplishments of the energy efficiency and renewable energy standards voluntarily entered into by electric utilities under this act.
     (4) On or before December 1, 2010, and biennially thereafter, the department of revenue shall submit a report to the legislature on the amount or value of tax deductions and exemptions claimed pursuant to this act.

NEW SECTION.  Sec. 13   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. 14   Sections 3 through 6, 8, and 10 through 12 of this act constitute a new chapter in Title 80 RCW.