BILL REQ. #:  H-4309.1 

Read first time 01/26/2004.   Referred to Committee on Technology, Telecommunications & Energy.

     AN ACT Relating to providing incentives for the voluntary option for retail electric customers to purchase qualified alternative energy resources from their electric utility suppliers; amending RCW 82.16.0491; reenacting and amending RCW 19.29A.090; adding new sections to chapter 82.16 RCW; creating a new section; providing an effective date; and providing expiration dates.

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

NEW SECTION.  Sec. 1   (1) The legislature finds that:
     (a) In 2001, the legislature recognized the importance of advancing the development of a market for qualified alternative energy resources by requiring as a matter of law that all electric utilities in the state, except small utilities, offer a green rate option, which entails the offering of a voluntary option for retail electric customers to purchase qualified alternative energy resources through their local utility;
     (b) Green rate options have generally been successful, even though they have been offered less than three years. However, two factors may be hindering the progress of these programs. One is that renewable resources have cost more than basic electric utility rates, making the options less economically attractive to customers. The second factor is a requirement that all costs associated with a green rate option must be borne by those customers who subscribe to it;
     (c) Because all costs involved with providing a green rate option must be allocated to its subscribers, marketing costs can compound an option's comparatively high cost and may diminish customer interest in it; and
     (d) The high cost of green rate options relative to basic electric utility rates may be a particular economic deterrent to low-income residential customers.
     (2) Therefore, the legislature declares:
     (a) It is in the public interest that electric utilities that offer a green rate option should be allowed a tax incentive to more aggressively market their programs with little or no additional expense to subscribers to the green rate option; and
     (b) Low-income residential customers should be given an opportunity to benefit from subscribing to a green rate option and contribute to the betterment of the state's environment through a billing discount for a green rate option that is supported by a tax incentive. Any billing discount that is not supported by a tax incentive would merely add to the cost of a green rate option to other customers and thus reduce its economic attractiveness overall.

NEW SECTION.  Sec. 2   A new section is added to chapter 82.16 RCW to read as follows:
     (1) Any light and power business that does not qualify for a tax credit under RCW 82.16.0491(2) and that offers a voluntary option for its retail electric customers to purchase qualified alternative energy resources under RCW 19.29A.090 shall be allowed a credit against taxes due under this chapter in an amount equal to fifty percent of all expenditures made in the calendar year in which the credit is taken to market its voluntary option program to retail electric customers.
     (2) For a light and power business to take the credit under this section, it must use the full value of the credit to supplement expenditures to market its option under RCW 19.29A.090.
     (3) Except as provided under subsection (4) of this section, no light and power business shall be eligible for tax credits under this section in excess of thirty-five thousand dollars in any calendar year. The credit may not exceed the amount of tax that would otherwise be due under this chapter. Expenditures not used to earn a credit in one calendar year may not be used to earn a credit in subsequent years.
     (4) A light and power business that qualifies for a tax credit under RCW 82.16.0491(2) may take a credit under this section in an amount equal to credit taken by the light and power business under RCW 82.16.0491 to market its option under RCW 19.29A.090. The combined total of credit taken under this section and credit taken under RCW 82.16.0491 shall not exceed thirty-five thousand dollars in any calendar year.
     (5) Application for a tax credit under this section may only be made in the form and manner prescribed in rules adopted by the department.
     (6) The credit under this section shall be taken not more than once quarterly and not less than once annually against taxes due for the same calendar year in which the amounts for which credit is claimed were expended to promote a voluntary option to purchase qualified alternative energy resources and must be claimed by the due date of the last tax return for the calendar year in which the expenditure is made.
     (7) This section expires December 31, 2013.

Sec. 3   RCW 82.16.0491 and 1999 c 311 s 402 are each amended to read as follows:
     (1) The following definitions apply to this section:
     (a) "Qualifying project" means a project designed to achieve job creation or business retention, to add or upgrade nonelectrical infrastructure, to add or upgrade health and safety facilities, to accomplish energy and water use efficiency improvements, including renewable energy development, to market a voluntary option for retail electric customers to purchase qualified alternative energy resources under RCW 19.29A.090, or to add or upgrade emergency services in any designated qualifying rural area.
     (b) "Qualifying rural area" means:
     (i) A rural county, which is a county with a population density of less than one hundred persons per square mile as determined by the office of financial management and published each year by the department for the period July 1st to June 30th; or
     (ii) Any geographic area in the state that receives electricity from a light and power business with twelve thousand or fewer customers and with fewer than twenty-six meters per mile of distribution line as determined and published by the department of revenue effective July 1st of each year. The department shall use current data provided by the electricity industry.
     (c) "Electric utility rural economic development revolving fund" means a fund devoted exclusively to funding qualifying projects in qualifying rural areas.
     (d) "Local board" is a board of directors with at least, but not limited to, three members representing local businesses and community groups who have been appointed by the sponsoring electric utility to oversee and direct the activities of the electric utility rural economic development revolving fund.
     (2) A light and power business with fewer than twenty-six active meters per mile of distribution line in any geographic area in the state shall be allowed a credit against taxes due under this chapter in an amount equal to fifty percent of contributions made in any calendar year directly to an electric utility rural economic development revolving fund. The credit shall be taken in a form and manner as required by the department. The credit under this section shall not exceed twenty-five thousand dollars per calendar year per light and power business. The credit may not exceed the tax that would otherwise be due under this chapter. Refunds shall not be granted in the place of credits. Expenditures not used to earn a credit in one calendar year may not be used to earn a credit in subsequent years.
     (3) The right to earn tax credits under this section expires December 31, ((2005)) 2013.
     (4) To qualify for the credit in subsection (2) of this section, the light and power business shall establish an electric utility rural economic development revolving fund which is governed by a local board whose members shall reside in the qualifying rural area served by the light and power business. The local board shall have authority to determine all criteria and conditions for the expenditure of funds from the electric utility rural economic development (([revolving])) revolving fund, and for the terms and conditions of repayment.
     (5) Any funds repaid to the electric utility rural economic development (([revolving])) revolving fund by recipients shall be made available for additional qualifying projects.
     (6) If at any time the electric utility rural economic development (([revolving])) revolving fund is dissolved, any moneys claimed as a tax credit under this section shall either be granted to a qualifying project or refunded to the state within two years of termination.
     (7) The total amount of credits that may be used in any fiscal year shall not exceed three hundred fifty thousand dollars in any fiscal year. The department shall allow the use of earned credits on a first-come, first-served basis. Unused earned credits may be carried over to subsequent years.

NEW SECTION.  Sec. 4   A new section is added to chapter 82.16 RCW to read as follows:
     (1) Any light and power business that offers a voluntary option for its retail electric customers to purchase qualified alternative energy resources under RCW 19.29A.090 shall be allowed a credit for amounts supporting low-income billing discounts provided under RCW 19.29A.090.
     (2) The credit allowed for the value of low-income billing discounts under this section shall not exceed one hundred dollars per customer per calendar year.
     (3) No light and power business shall be eligible for tax credits under this section in excess of one hundred thousand dollars in any calendar year. The credit may not exceed the amount of tax that would otherwise be due under this chapter. Refunds shall not be granted in place of credits. Expenditures not used to earn a credit in one calendar year may not be used to earn a credit in subsequent years.
     (4) Application for a tax credit under this section may only be made in the form and manner prescribed in rules adopted by the department.
     (5) The credit under this section shall be taken not more than once quarterly and not less than once annually against taxes due for the same calendar year in which the amounts for which credit is claimed were used for billing discounts and must be claimed by the due date of the last tax return for the calendar year in which the expenditure is made.
     (6) For the purposes of this section: (a) "Low-income residential customer" means a low-income household as defined on December 31, 2003, in the low-income home energy assistance act of 1981 as amended August 1, 1999, 42 U.S.C. Sec. 8623 et seq.; and (b) "low-income billing discount" means a reduction in the amount charged by an electric utility for providing an option to purchase qualified alternative energy resources to low-income residential customers.
     (7) This section expires December 31, 2013.

Sec. 5   RCW 19.29A.090 and 2002 c 285 s 6 and 2002 c 191 s 1 are each reenacted and amended 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 alternative energy resources in accordance with this section.
     (2) Each electric utility must include with its retail electric customer's regular billing statements, at least quarterly, a voluntary option to purchase qualified alternative energy resources. The option may allow customers to purchase qualified alternative energy resources at fixed or variable rates and for fixed or variable periods of time, including but not limited to monthly, quarterly, or annual purchase agreements. A utility may provide qualified alternative 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 a qualified alternative energy resource and that the second party agrees to transfer such evidence exclusively to the benefit of the utility.
     (3) For the purposes of this section, a "qualified alternative energy resource" means the electricity produced from generation facilities 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) qualified hydropower; or (h) 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 that have been treated with chemical preservatives such as creosote, pentachlorophenol, or copper-chrome-arsenic.
     (4) For the purposes of this section, "qualified hydropower" means the energy produced either: (a) As a result of modernizations or upgrades made after June 1, 1998, to hydropower facilities operating on May 8, 2001, that have been demonstrated to reduce the mortality of anadromous fish; or (b) by run of the river or run of the canal hydropower facilities that are not responsible for obstructing the passage of anadromous fish.
     (5) 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. All costs and benefits associated with any option offered by an electric utility under this section must be allocated to the customers who voluntarily choose that option and may not be shifted to any customers who have not chosen such option.
     (6) Utilities may pursue known, lawful aggregated purchasing of qualified alternative energy resources with other utilities to the extent aggregated purchasing can reduce the unit cost of qualified alternative energy resources, and are encouraged to investigate opportunities to aggregate the purchase of alternative energy resources by their customers. Aggregated purchases by investor-owned utilities must comply with any applicable rules or policies adopted by the commission related to least-cost planning or the acquisition of renewable resources.
     (((6))) (7) Each consumer-owned utility must report annually 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 alternative energy resources purchased by customers, the amount of utility investments in qualified alternative energy resources, and the results of pursuing aggregated purchasing opportunities. 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.
     (8) Electric utilities may provide a low-income billing discount on the option to purchase qualified alternative energy resources to any of its low-income residential customers, for as long as a tax credit is allowed for such discounts under section 4 of this act. Electric utilities may seek the assistance of a qualifying organization to identify low-income residential customers who should be eligible for a low-income billing discount under this subsection.
     (9) For the purposes of this section: (a) "Low-income residential customer" means a low-income household as defined on December 31, 2003, in the low-income home energy assistance act of 1981 as amended August 1, 1999, 42 U.S.C. Sec. 8623 et seq.; (b) "low-income billing discount" means a reduction in the amount charged for providing an option to purchase qualified alternative energy resources to low-income residential customers by an electric utility; and (c) "qualifying organization" means an entity that has a contractual agreement with the department of community, trade, and economic development to administer in a specified service area low-income home energy assistance funds received from the federal government and such other funds that may be received by the entity.

NEW SECTION.  Sec. 6   Sections 2 and 4 of this act take effect January 1, 2005.