Background: Cost-Recovery Incentive Program for Renewable Energy Systems. In 2005 the Legislature created a cost-recovery incentive program to promote renewable energy systems that produce electricity from solar, wind, or anaerobic digesters. An individual, business, or local government purchasing an eligible system can apply for an incentive payment from the electric utility serving the applicant. The incentive provides at least 15 cents for each kilowatt-hour (kWh) of energy produced, with extra incentives for solar generating systems that use components manufactured in Washington. Payments are capped at $2,000 annually per applicant.

In 2009 the Legislature expanded the program to include, among other things, community solar projects, which are either: (1) a solar energy system owned by local individuals, households, or nonutility businesses that is placed on the property owned by their cooperating local governmental entity; or (2) a utility-owned solar energy system that is voluntarily funded by the utility's ratepayers where, in exchange for their financial support, the utility gives contributors a payment or credit on their utility bill for the value of the electricity produced by the project. Community solar projects are eligible for incentives of 30 cents for each kWh of energy produced. Each applicant in a community solar project is eligible for annual incentives up to $5,000 per year.

During the rulemaking to implement the new community solar provisions, the Department of Revenue concluded that community solar projects established by limited liability companies (LLCs) could not receive more than one incentive payment.

Summary of Bill (Recommended Substitute): Capping the eligibility of community solar projects. Only community solar projects with a maximum instantaneous output of 100 kilowatts (kW) of electricity or less are eligible to receive cost-recovery incentive payments.

Requiring cost-recovery projects to be located in Washington. All renewable projects participating in the cost recovery incentive program must be located in Washington.

Requiring owners of community solar projects to delegate one owner as a single point of contact. Owners of a community solar project that are not an LLC must appoint one owner as an administrator who is responsible for applying and receiving cost recovery incentive payments on behalf of the other owners.

Allowing participants in community solar projects owned by LLCs to receive incentive payments. An LLC owning a community solar project may submit one incentive application on behalf of each member of the company. Each member of the LLC is eligible for an incentive payment up to $5,000 per year.

Clarifying the amount of incentive payments to owners of community solar projects. Owners of a community solar project are only entitled to incentive payments in proportion to each ownership share.

Creates hold-harmless provisions protecting utilities. The owners of community solar projects must hold harmless the utility and its employees for their good faith reliance on the information in a cost recovery application or certification. In addition, the utility and its employees are immune from civil liability for their good faith reliance on the information contained in such documents.

Technical changes are made.

EFFECT OF CHANGES MADE BY ENVIRONMENT, WATER & ENERGY COMMITTEE (Recommended Substitute): Requires community solar projects with multiple owners to delegate one owner as a single point of contact when applying for a cost recovery incentive. Requires all renewable projects participating in the cost recovery program to be located in Washington. Lowers the maximum size of an eligible community solar project from 2 MW to 100 kW. Requires owners of community solar projects to hold harmless the utility and its employees for the good faith reliance on the information in a cost recovery application or certification. In addition, the utility is immune from civil liability for a good faith reliance on the information contained in such documents. Clarifies that co-owners of a community solar project are only entitled to incentive payments in proportion to each ownership share.

Staff Summary of Public Testimony on Original Bill: PRO: Recognition of LLCs will allow investors to take full advantage of federal renewable energy incentives. PSE supports the bill and will submit language for streamlining administration of the program. Allowing LLCs to participate in community solar system will lead to wider deployment of solar energy with long-term benefits for the economy and the environment.

Plain language should be used in the bill or else the community solar provisions could be misinterpreted. Cooperatives should be allowed to participate in community solar projects. Community solar allows the disenfranchised segment of society a chance to put their money where their values are and use the state's progressive solar incentives. Clarifications are suggested to the MW cap. Other corporate forms should be recognized and a limitation to Washington residents should be added. The current provision requiring that incentive payments be proportionally reduced if requests exceed the fund should be removed.

OTHER: Clarifications are needed for the requirements concerning utility-owned community solar projects.

Persons Testifying: PRO: Aron Campbell, Campbell Energy & Zohm Energy; Joe Deets, Community Energy Solutions; Denny Eliason, PSE; Jason Keyes, Solar Washington.

OTHER: Kathleen Collins, PacifiCorp; Collins Sprague, Avista.

Signed In, Unable to Testify & Submitted Written Testimony: PRO: Chris Herman, Winter Sun Design; Stanley Florek, Tangerine Solar; Trevor Tregellas, Daylight Investments; Michael Williams, Zohm Energy.