"NEW SECTION.  Sec. 1   (1) The legislature finds that Washington state has the opportunity to realize a prosperous, affordable, and clean energy future through energy efficiency.
     (2) The pilot financing mechanism established in this chapter may enable local governments to expand and improve existing energy conservation and energy efficiency loan programs to aid the private and nonprofit sectors in undertaking residential, commercial, and industrial energy efficiency upgrades.
     (3) The legislature finds that this financing tool may lead to reductions in household energy bills, provide incentives for the creation of new family-wage jobs in construction, manufacturing, and installation of energy-saving products, encourage investments by the utility sector in a cleaner environment, decrease the need for new power plant construction, and increase energy security.

NEW SECTION.  Sec. 2   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Energy conservation equipment" means equipment for the conservation or more efficient use of energy, regardless of source, installed at or near the intended place of use. However, the equipment may not include any individual equipment or co-owned and controlled cluster of equipment with a generating capacity that exceeds the net metering system electrical generating capacity threshold established in RCW 80.60.010(10)(a). Energy conservation equipment includes, but is not limited to: Weatherizing equipment; energy-conserving lighting systems, heating and cooling systems, equipment to replace inefficient wood burning heating devices, and appliances; and equipment or systems that permit owners or substantial users of property or equipment to generate all or a portion of their own electricity through the on-site installation of distributed electricity generation systems that use as fuel solar, wind, geothermal, or hydropower, or other renewable resources available on-site and not from a commercial source.
     (2) "Energy conservation services" means the provision of services to assist owners or substantial users of structures or energy conservation equipment in the acquisition, installation, and operation of energy conservation equipment, fixtures, or improvements. Energy conservation services include, but are not limited to: Energy audit services; weatherization services; energy conservation equipment financing, acquisition, and installation services; services to replace inefficient wood burning heating devices; and other measures to reduce energy on-site consumption regardless of source. Energy conservation services may not be considered "a conversion from one energy source to another" that is limited to the change or substitution of one commercial energy supplier for another commercial energy supplier.
     (3) "Municipality" means a city or town.

NEW SECTION.  Sec. 3   The provision of energy conservation services under this chapter is declared to be a public use and a public and municipal purpose, which may be conducted through a public utility operated by a municipality. Energy conservation services may be provided through an existing utility system already operated by the municipality. A municipality that provides energy conservation services under this chapter is declared to be engaged in the sale or distribution of energy services under Article VIII, section 10 of the state Constitution.

NEW SECTION.  Sec. 4   (1)(a) The authority provided under this chapter applies to municipalities wholly located within the electric service territories of Tacoma public utilities, Seattle city light, and Puget Sound energy as of the effective date of this section.
     (b) The authorization in (a) of this subsection is limited to the municipality's boundaries and do not extend to any unincorporated areas in an electric utility's service area.
     (2)(a) By ordinance, a municipality may create an energy conservation services utility for the purpose of providing to its inhabitants and property owners energy conservation services that lead to the more efficient consumption of energy resources, from whatever source generated, and may construct, purchase, acquire, lease, add to, extend, maintain, and operate a system or program of energy conservation services.
     (b) Prior to creating an energy conservation services utility, the legislative authority of the municipality must hold a public hearing and make a legislative determination, based on presentations at the hearing, that the energy conservation services proposed to be provided by the municipality will make available additional or complementary services, target underserved areas or populations, or otherwise add incremental value to the preexisting programs and services provided by an electric or natural gas energy distribution utility servicing the municipality.
     (c) Energy conservation services are only authorized under this chapter if the cost per unit of energy saved or produced by the use of such materials and equipment is less than the cost per unit of energy produced by the next least costly new energy resource that could be acquired to meet future demand.
     (3) For the purpose of providing energy conservation services, the municipality has the full power to operate and regulate such systems and programs; to enter into agreements for the maintenance and operation of any facilities, equipment, or systems, under such terms and conditions as may be determined by the legislative authority of the municipality to be in the municipality's interest; and other powers as may be necessary for the provision and financing of energy conservation services. Nothing in this chapter authorizes any municipality to generate, transmit, distribute, or sell electricity. Nothing in this chapter may be construed to restrain or limit the authority of any individual, partnership, corporation, private utility, or public utility from establishing and providing energy conservation services.
     (4) The legislative authority of the municipality has full authority to set rates or charges for energy conservation services provided to customers of the energy conservation service utility if the rates charged are uniform for the same class of customer or service. In classifying customers served or services furnished, the legislative authority may consider: The difference in cost of services to the various customers; the location of the various customers within the municipality; the difference in cost of maintenance, operation, repair, and replacement of the various parts of the system; the different character of the services furnished various customers; the quantity and quality of the services furnished; and any other matters that present a reasonable difference as a ground for distinction. The legislative authority of the municipality has the full authority to regulate and control the energy conservation services so delivered, together with the right to handle and sell or lease any energy conservation equipment, fixtures, or accessories of any kind, necessary and convenient for the provision of energy conservation services.
     (5) A qualifying utility under RCW 19.280.030 that serves a municipality providing energy conservation services under this chapter may exclusively claim the energy savings achieved by the energy conservation services for purposes of complying with RCW 19.280.040. At the request of the qualifying utility, municipalities must provide the qualifying utility, the department of commerce, and the Washington utilities and transportation commission with any relevant data to effectuate this purpose.
     (6) A municipality may issue general obligation or revenue bonds, notes, warrants, or other evidences of indebtedness for the purposes of providing all or part of the costs of providing energy conservation services, which shall be issued and sold in accordance with chapters 39.44, 39.46, 39.50, and 39.53 RCW. No municipality may enter into a contract to sell loans financed by an energy services conservation utility to a third party for the purpose of securitizing those loans without approval by the legislative authority of the municipality. Any contract that requires a municipality to service loans that it originated must limit the liability of the municipality by prohibiting the commingling of its loans in a securities instrument with loans issued by other parties. No indebtedness may be issued after June 30, 2015. However, indebtedness previously issued may continue to be serviced.
     (7) Municipalities providing energy conservation services under this chapter must establish quality assurance programs that must include the following: (a) A requirement that contractors be prequalified; (b) the maintenance of a list of prequalified contractors; (c) the creation of minimum standards for prequalified contractors that include: (i) Legal compliance procedures; (ii) proper classification of employees; (iii) use of a qualified energy efficiency workforce if such workers are available; and (iv) maintenance of records needed to verify compliance; and (d) a third-party, independent verification process.
     (8) The authority granted in this chapter must be consistent with, and not limit, supplant, replace, or conflict with, any authority to provide energy conservation services through an existing municipal utility.
     (9) Energy conservation service utilities formed under this chapter must file annual reports stating the number of customers served, the amount of assistance per customer, the estimated energy savings per customer, and the effectiveness of their quality assurance programs. Municipalities must submit their reports to the respective electric utilities serving their residents, which must consolidate the reports and submit them electronically to the appropriate legislative committees by December 1st each year until the expiration of the pilot program.

NEW SECTION.  Sec. 5   (1) Any municipality engaged in the provision of energy conservation services under this chapter is authorized, within limits established by the Constitution of the state of Washington, to assist the owners of structures or equipment in financing the acquisition and installation of materials and equipment, for compensation or otherwise, for the conservation or more efficient use of energy in such structures or equipment pursuant to an energy conservation plan adopted by the municipality if the cost per unit of energy saved or produced by the use of such materials and equipment is less than the cost per unit of energy produced by the next least costly new energy resource that could be acquired to meet future demand. Any financing authorized under this chapter may only be used for energy conservation services in existing structures.
     (2) Except where otherwise authorized, such assistance is limited to:
     (a) Providing an inspection of the structure or equipment, either directly or through one or more inspectors under contract, to determine and inform the owner of the estimated cost of purchasing and installing conservation materials and equipment for which financial assistance will be approved and the estimated life cycle savings in energy costs that are likely to result from the installation of the materials or equipment;
     (b) Providing a list of businesses that sell and install the materials and equipment within or in close proximity to the service area of the municipality, each of which businesses must have requested to be included and must have the ability to provide the products in a workmanlike manner and to utilize the materials in accordance with the prevailing national standards;
     (c) Arranging to have approved conservation materials and equipment installed by a private contractor whose bid is acceptable to the owner of the residential structure and verifying the installation; and
     (d) Arranging or providing financing for the purchase and installation of approved conservation materials and equipment. The materials and equipment must be purchased from a private business and be installed by a private business or the owner.
     (3)(a) Pay back must be in the form of incremental additions to an existing local government utility or tax bill, billed either together with use charge or separately. Loans may not exceed two hundred forty months in length. The municipality may make assistance available in the form of grants made under this chapter for energy conservation improvements to existing structures owned or occupied by persons qualifying as poor or infirm consistent with the state Constitution.
(b) If pay back is in the form of incremental additions to a property tax bill, and if a servicer maintains an escrow account for a borrower of the energy conservation services related to the property, then the municipality shall contact the servicer of the existing escrow within thirty days to communicate the incremental increase in monthly payments required to make the energy conservation services payment when due.
     (4) The municipal legislative authority shall approve the aggregate amount of such loans and the repayment terms by ordinance and may, by ordinance, delegate to staff the approval of individual loans consistent with loan program guidelines approved in the ordinance. The municipality and the property owner shall enter into a loan agreement setting forth the terms of the loan, which agreement may provide for acceleration in the event a loan installment is delinquent. In order to secure loans, the municipality shall have a statutory lien on the property, not exceeding five percent of the assessed value of the property as of the last assessment preceding the loan funding date, on which energy conservation improvements so financed are installed or constructed. The statutory lien shall be paramount and superior to any other lien or encumbrance thereafter created except a lien for general taxes, special assessment district assessments, and liens filed under RCW 35.92.360, 54.16.280, or 36.94.460. Any lien for any amount in excess of five percent of the assessed value of the property may be obtained and perfected in accordance with applicable law. The loan shall be a lien upon property from the time the loan agreement is executed. If the municipal legislative authority in granting loans has acted in good faith and without fraud, the loan shall be valid and enforceable as such and the lien thereof upon the property shall be valid.
     (5) The municipality may foreclose a lien in an action in the superior court. All or any of the tracts subject to such a lien may be proceeded against in a single action, and all parties appearing of record as owning or claiming to own or having an interest in or lien upon the tracts involved shall be impleaded in the action as parties defendant. An action to foreclose a lien must be commenced within two years after the date that the loan first becomes subject to acceleration under the loan documents. Liens to secure loans may be foreclosed in the manner provided by RCW 35.67.250 through 35.67.270.
     (6) The municipality may pledge revenues from loan payments to secure and repay general obligation or revenue bonds, notes, or other forms of indebtedness issued by or on behalf of the municipality, which indebtedness shall be issued in accordance with this chapter and chapters 39.44, 39.46, 39.50, and 39.53 RCW. For the purpose of securing the payment of the principal of and interest on any bonds or notes, the municipality may create a reserve fund. The principal amount of any loan may include a proportionate share of the costs of issuing the bonds, notes, or other indebtedness, and may include up to an additional amount to fund a reserve fund, consistent with RCW 39.44.140. The bonds, warrants, or other evidences of indebtedness shall be deemed to be for capital purposes within the meaning of the uniform system of accounts for municipal corporations.

Sec. 6   RCW 35.92.070 and 1987 c 145 s 1 are each amended to read as follows:
     When the governing body of a city or town deems it advisable that the city or town purchase, acquire, or construct any such public utility, or make any additions and betterments thereto or extensions thereof, it shall provide therefor by ordinance, which shall specify and adopt the system or plan proposed, and declare the estimated cost thereof, as near as may be, and the ordinance shall be submitted for ratification or rejection by majority vote of the voters of the city or town at a general or special election.
     (1) No submission shall be necessary:
     (a) When the work proposed is an addition to, or betterment of, extension of, or an increased water supply for existing waterworks, or an addition, betterment, or extension of an existing system or plant of any other public utility;
     (b) When in the charter of a city a provision has been adopted authorizing the corporate authorities thereof to provide by ordinance for acquiring, opening, or operating any of such public utilities; ((or))
     (c) When in the judgment of the corporate authority, the public health is being endangered by the discharge of raw or untreated sewage into any body of water and the danger to the public health may be abated by the construction and maintenance of a sewage disposal plant; or
     (d) When the governing body of a city or town deems it advisable to form an energy conservation services utility under chapter 35.-- RCW (the new chapter created in section 7 of this act).
     (2) Notwithstanding subsection (1) of this section, submission to the voters shall be necessary if:
     (a) The project or work may produce electricity for sale in excess of present or future needs of the water system;
     (b) The city or town does not own or operate an electric utility system;
     (c) The work involves an ownership greater than twenty-five percent in a new water supply project combined with an electric generation facility; and
     (d) The combined facility has an installed capacity in excess of five megawatts.
     (3) Notwithstanding subsection (1) of this section, submission to the voters shall be necessary to make extensions to a public utility which would expand the previous service capacity by fifty percent or more, where such increased service capacity is financed by the issuance of general obligation bonds.
     (4) Thirty days' notice of the election shall be given in the official newspaper of the city or town, by publication at least once each week in the paper during such time.
     (5) When a proposition has been adopted, or in the cases where no submission is necessary, the corporate authorities of the city or town may proceed forthwith to purchase, construct, and acquire the public utility or make additions, betterments, and extensions thereto and to make payment therefor.

NEW SECTION.  Sec. 7   Sections 1 through 5 of this act constitute a new chapter in Title 35 RCW.

NEW SECTION.  Sec. 8   Sections 1 through 6 of this act expire June 30, 2015."