BILL REQ. #:  H-0807.2 

Read first time 01/16/09.   Referred to Committee on Technology, Energy & Communications.

     AN ACT Relating to energy resources; and amending RCW 19.285.010, 19.285.030, 19.285.040, 19.285.050, 19.285.060, and 19.285.080.

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

Sec. 1   RCW 19.285.010 and 2007 c 1 s 1 are each amended to read as follows:
     This chapter concerns requirements for new energy resources. This chapter requires large utilities to obtain fifteen percent of their electricity, or one hundred percent of their electricity to serve load growth, whichever is less, from new renewable resources such as solar and wind by 2020 and undertake cost-effective energy conservation.

Sec. 2   RCW 19.285.030 and 2007 c 1 s 3 are each amended to read as follows:
     The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Attorney general" means the Washington state office of the attorney general.
     (2) "Auditor" means: (a) The Washington state auditor's office or its designee for qualifying utilities under its jurisdiction that are not investor-owned utilities; or (b) an independent auditor selected by a qualifying utility that is not under the jurisdiction of the state auditor and is not an investor-owned utility.
     (3) "Commission" means the Washington state utilities and transportation commission.
     (4) "Conservation" means any reduction in electric power consumption resulting from increases in the efficiency of energy use, production, or distribution.
     (5) "Consumer-owned utility" has the same meaning as defined in RCW 19.29A.010.
     (6) "Cost-effective" has the same meaning as defined in RCW 80.52.030.
     (((6))) (7) "Council" means the Washington state apprenticeship and training council within the department of labor and industries.
     (((7))) (8) "Customer" means a person or entity that purchases electricity for ultimate consumption and not for resale.     
     (((8))) (9) "Department" means the department of community, trade, and economic development or its successor.
     (((9))) (10) "Distributed generation" means an eligible renewable resource where the generation facility or any integrated cluster of such facilities has a generating capacity of not more than five megawatts.
     (((10))) (11) "Eligible renewable resource" means:
     (a) Electricity from a generation facility powered by a renewable resource other than fresh water that commences operation after March 31, 1999, where((: (i))) the facility is located ((in the Pacific Northwest; or (ii) the electricity from the facility is delivered into Washington state on a real-time basis without shaping, storage, or integration services)) within the geographic boundary of the western electricity coordinating council or its successor entity, but in no event may the geographic location be less than that included in the western electricity coordinating council geographic boundary on the effective date of this section; ((or))
     (b) Incremental electricity produced as a result of efficiency improvements completed after March 31, 1999, to hydroelectric generation projects ((owned by a qualifying utility and)) located in the Pacific Northwest or to hydroelectric generation in irrigation pipes and canals located in the Pacific Northwest((, where the additional generation in either case does not result in new water diversions or impoundments));
     (c) Electricity from new hydroelectric generation located in the Pacific Northwest, including pumped storage and new or existing irrigation hydrogeneration, that have met applicable licensing requirements, if any, of the federal energy regulatory commission; or
     (d) Electricity produced from hydroelectric generation, including pumped storage projects, located in the Pacific Northwest that is used to integrate other eligible renewable resources into the transmission grid for delivery to a qualifying utility.
     (((11))) (12) "Investor-owned utility" has the same meaning as defined in RCW 19.29A.010.
     (((12))) (13) "Load" means the amount of kilowatt-hours of electricity delivered in the most recently completed year by a qualifying utility to its Washington retail customers.
     (((13))) (14) "Nonpower attributes" means all environmentally related characteristics, exclusive of energy, capacity reliability, and other electrical power service attributes, that are associated with the generation of electricity from a renewable resource, including but not limited to the facility's fuel type, geographic location, vintage, qualification as an eligible renewable resource, and avoided criteria emissions of pollutants to the air, soil, or water((, and avoided emissions of carbon dioxide and other greenhouse gases)). Nonpower attributes do not include avoided emissions of carbon dioxide and other greenhouse gases, which may be retained by the generator or sold separately.
     (((14))) (15) "Pacific Northwest" has the same meaning as defined for the Bonneville power administration in section 3 of the Pacific Northwest electric power planning and conservation act (94 Stat. 2698; 16 U.S.C. Sec. 839a).
     (((15))) (16) "Public facility" has the same meaning as defined in RCW 39.35C.010.
     (((16))) (17) "Qualifying utility" means an electric utility, as the term "electric utility" is defined in RCW 19.29A.010, that serves more than twenty-five thousand customers in the state of Washington. The number of customers served may be based on data reported by a utility in form 861, "annual electric utility report," filed with the energy information administration, United States department of energy.
     (((17))) (18) "Renewable energy credit" means a tradable certificate of proof of at least one megawatt-hour of an eligible renewable resource where ((the generation facility is not powered by fresh water,)) the certificate includes all of the nonpower attributes associated with that one megawatt-hour of electricity((,)) and the certificate is verified by a renewable energy credit tracking system selected by the department.
     (((18))) (19) "Renewable resource" means: (a) Water; (b) wind; (c) solar energy; (d) geothermal energy; (e) landfill gas; (f) wave, ocean, or tidal power; (g) gas from sewage treatment facilities; (h) biodiesel fuel as defined in RCW 82.29A.135 that is not derived from crops raised on land cleared from old growth or first-growth forests where the clearing occurred after December 7, 2006; ((and)) (i) byproducts of pulping or wood manufacturing processes located within the geographic boundary of the western electricity coordinating council or its successor entity, but in no event may the geographic location be less than that included in the western electricity coordinating council on the effective date of this section, including but not limited to bark, wood chips, sawdust, and lignin in spent pulping liquors; (j) black liquors derived from algae; and (k) biomass energy based on animal waste, food waste, yard waste, or solid organic fuels from wood, forest, or field residues, or dedicated energy crops that do not include (i) wood pieces that have been treated with chemical preservatives such as creosote, pentachlorophenol, or copper-chrome-arsenic; (ii) ((black liquor byproduct from paper production; (iii))) wood from old growth forests; or (((iv))) (iii) municipal solid waste.
     (((19))) (20) "Rule" means rules adopted by an agency or other entity of Washington state government to carry out the intent and purposes of this chapter.
     (((20))) (21) "Year" means the twelve-month period commencing January 1st and ending December 31st.

Sec. 3   RCW 19.285.040 and 2007 c 1 s 4 are each amended to read as follows:
     (1) Each qualifying utility shall pursue all available conservation that is cost-effective, achievable, reliable, and feasible.
     (a) By January 1, 2010, ((using methodologies consistent with those used by the Pacific Northwest electric power and conservation planning council in its most recently published regional power plan,)) each qualifying utility shall identify its achievable cost-effective conservation potential through 2019. Cost-effective conservation potential includes achievable cost-effective conservation related to energy use, production, and distribution. At least every two years thereafter, the qualifying utility shall review and update this assessment for the subsequent ten-year period.
     (b) ((Beginning)) By January 1, 2010, each qualifying utility shall establish and make publicly available a biennial acquisition target for cost-effective conservation consistent with its identification of achievable opportunities in (a) of this subsection, and meet that target during the subsequent two-year period. At a minimum, each biennial acquisition target must be no lower than the qualifying utility's pro rata share for that two-year period of its achievable cost-effective conservation potential for the subsequent ten-year period.
     (c) In meeting its conservation targets, a qualifying utility may count high-efficiency cogeneration owned and used by a retail electric customer to meet its own needs. High-efficiency cogeneration is the sequential production of electricity and useful thermal energy from a common fuel source, where, under normal operating conditions, the facility ((has a useful thermal energy output of no less than thirty-three percent of the total energy output)) is designed to have a projected overall thermal conversion efficiency of at least seventy percent. For the purposes of this section, overall thermal conversion efficiency means the output of electricity plus usable heat divided by fuel input. The reduction in load due to high-efficiency cogeneration shall be((: (i) Calculated as the ratio of the fuel chargeable to power heat rate of the cogeneration facility compared to the heat rate on a new and clean basis of a best-commercially available technology combined-cycle natural gas-fired combustion turbine; and (ii))) counted towards meeting the biennial conservation target in the same manner as other conservation savings.
     (d) The commission may determine if a conservation program implemented by an investor-owned utility is cost-effective based on the commission's policies and practice.
     (e) The commission may rely on its standard practice for review and approval of investor-owned utility conservation targets.
     (f) The governing board of a consumer-owned utility shall determine if a conservation program to be implemented by the consumer-owned utility is achievable and cost-effective.
     (2)(a) Each qualifying utility shall use eligible renewable resources or acquire equivalent renewable energy credits, or a combination of both, to meet the following annual targets:
     (i) At least three percent of its load, or one hundred percent of its load growth from the effective date of this section, whichever is less, by January 1, 2012, and each year thereafter through December 31, 2015;
     (ii) At least nine percent of its load, or one hundred percent of its load growth from the effective date of this section, whichever is less, by January 1, 2016, and each year thereafter through December 31, 2019; and
     (iii) At least fifteen percent of its load, or one hundred percent of its load growth from the effective date of this section, whichever is less, by January 1, 2020, and each year thereafter.
     (b) A qualifying utility may count distributed generation at double the facility's electrical output if the utility: (i) Owns or has contracted for the distributed generation and the associated renewable energy credits; or (ii) has contracted to purchase the associated renewable energy credits.
     (c) In meeting the annual targets in (a) of this subsection, a qualifying utility shall calculate its annual load based on the average of the utility's load for the previous two years or calculate its load growth beginning with the retail sales of electricity in calendar year 2007.
     (d) A qualifying utility shall be considered in compliance with an annual target in (a) of this subsection if: (i) The utility's weather-adjusted load for the previous three years on average did not increase over that time period; (ii) after December 7, 2006, the utility did not commence or renew ownership or incremental purchases of electricity from resources other than renewable resources other than on a daily spot price basis and the electricity is not offset by equivalent renewable energy credits; and (iii) the utility invested at least one percent of its total annual retail revenue requirement that year on eligible renewable resources, renewable energy credits, or a combination of both.
     (e) The requirements of this section may be met for any given year with renewable energy credits produced during that year, the preceding year, or the subsequent year. Each renewable energy credit may be used only once to meet the requirements of this section.
     (f) In complying with the targets established in (a) of this subsection, a qualifying utility may not count((:
     (i))) eligible renewable resources or distributed generation where the associated renewable energy credits are owned by a separate entity((; or
     (ii) Eligible renewable resources or renewable energy credits obtained for and used in an optional pricing program such as the program established in RCW 19.29A.090)).
     (g) Where fossil and combustible renewable resources are cofired in one generating unit located in the Pacific Northwest where the cofiring commenced after March 31, 1999, the unit shall be considered to produce eligible renewable resources in direct proportion to the percentage of the total heat value represented by the heat value of the renewable resources.
     (h)(i) A qualifying utility that acquires an eligible renewable resource or renewable energy credit may count that acquisition at one and two-tenths times its base value:
     (A) Where the eligible renewable resource comes from a facility that commenced operation after December 31, 2005; and
     (B) Where the developer of the facility used apprenticeship programs approved by the council during facility construction.
     (ii) The council shall establish minimum levels of labor hours to be met through apprenticeship programs to qualify for this extra credit.
     (i) A qualifying utility shall be considered in compliance with an annual target in (a) of this subsection if events beyond the reasonable control of the utility that could not have been reasonably anticipated or ameliorated prevented it from meeting the renewable energy target. Such events include weather-related damage, mechanical failure, strikes, lockouts, and actions of a governmental authority that adversely affect the generation, transmission, or distribution of an eligible renewable resource under contract to a qualifying utility.
     (j) A qualifying utility is not required to comply with an annual target in (a) of this subsection if purchases of eligible renewable resources would displace hydroelectric generation that is available to serve the qualifying utility's retail load.
     (3) Utilities that become qualifying utilities after December 31, 2006, shall meet the requirements in this section on a time frame comparable in length to that provided for qualifying utilities as of December 7, 2006.

Sec. 4   RCW 19.285.050 and 2007 c 1 s 5 are each amended to read as follows:
     (1)(a) A qualifying utility shall be considered in compliance with an annual target created in RCW 19.285.040(2) for a given year if the utility invested four percent of its total annual retail revenue requirement on the incremental costs of eligible renewable resources, the cost of renewable energy credits, or a combination of both, but a utility may elect to invest more than this amount.
     (b) The incremental cost of an eligible renewable resource is calculated as the difference between the levelized delivered cost of the eligible renewable resource, regardless of ownership, compared to the levelized delivered cost of an equivalent amount of reasonably available substitute resources that do not qualify as eligible renewable resources, where the resources being compared have the same contract length or facility life.
     (c)(i) Except as provided in (c)(ii) of this subsection, for purposes of this section and RCW 19.285.040(2)(d), an investor-owned utility shall use its commission-approved total retail revenue requirement resulting from the utility's most recent general rate case.
     (ii) For each investor-owned utility, if the commission has not issued an order in a general rate case for that utility in any of the three years prior to January 1st of a year for which an annual target is created in RCW 19.285.040(2), the commission shall calculate the total annual retail revenue requirement for that utility for that target year. The total annual retail revenue requirement for each such utility must be calculated based on only the operations of the utility relating to electricity, and must be updated on an annual basis until the commission issues an order for that utility in a general rate case. The total annual retail revenue requirement calculated for purposes of this subsection (1)(c)(ii) has no bearing on the commission's rate-making policies and practices under Title 80 RCW.
     (2) An investor-owned utility is entitled to recover all prudently incurred costs associated with compliance with this chapter. The commission shall address cost recovery issues of qualifying utilities that are investor-owned utilities that serve both in Washington and in other states in complying with this chapter.

Sec. 5   RCW 19.285.060 and 2007 c 1 s 6 are each amended to read as follows:
     (1) Except as provided in subsection (2) of this section, a qualifying utility that fails to comply with the energy conservation or renewable energy targets established in RCW 19.285.040 shall pay an administrative penalty to the state of Washington in the amount of fifty dollars for each megawatt-hour of shortfall. Beginning in 2007, this penalty shall be adjusted annually according to the rate of change of the inflation indicator, gross domestic product-implicit price deflator, as published by the bureau of economic analysis of the United States department of commerce or its successor.
     (2) A qualifying utility that does not meet an annual renewable energy target established in RCW 19.285.040(2) is exempt from the administrative penalty in subsection (1) of this section for that year if the commission for investor-owned utilities or the auditor for all other qualifying utilities determines that the utility complied with RCW 19.285.040(2) (d) or (i) or 19.285.050(1).
     (3) A qualifying utility must notify its retail electric customers in published form within three months of incurring a penalty regarding the size of the penalty and the reason it was incurred.
     (4) The commission shall determine if an investor-owned utility may recover the cost of this administrative penalty in electric rates, and may consider providing positive incentives for an investor-owned utility to exceed the targets established in RCW 19.285.040.
     (5) Administrative penalties collected under this chapter shall be deposited into the energy independence act special account which is hereby created. All receipts from administrative penalties collected under this chapter must be deposited into the account. Expenditures from the account may be used only for the purchase of renewable energy credits or for energy conservation projects at public facilities, local government facilities, community colleges, or state universities. The state shall own and retire any renewable energy credits purchased using moneys from the account. Only the director of general administration or the director's designee may authorize expenditures from the account. The account is subject to allotment procedures under chapter 43.88 RCW, but an appropriation is not required for expenditures.
     (6) For a qualifying utility that is an investor-owned utility, the commission shall determine compliance with the provisions of this chapter and assess penalties for noncompliance as provided in subsection (1) of this section.
     (7) For qualifying utilities that are not investor-owned utilities((,)): (a) The governing board is responsible for determining compliance with the provisions of this chapter and rules adopted under this chapter; (b) the auditor is responsible for auditing compliance with this chapter and rules adopted under this chapter that apply to those utilities; and (c) the attorney general is responsible for enforcing that compliance. By November 1, 2009, the auditor may develop a guidance manual related to compliance with the conservation provisions of this chapter and other relevant state law.

Sec. 6   RCW 19.285.080 and 2007 c 1 s 8 are each amended to read as follows:
     (1) The commission may adopt rules to ensure the proper implementation and enforcement of this chapter as it applies to investor-owned utilities.
     (2) The department shall adopt rules concerning only process, timelines, and documentation to ensure the proper implementation of this chapter as it applies to qualifying utilities that are not investor-owned utilities. Those rules include, but are not limited to, rules associated with a qualifying utility's development of conservation targets under RCW 19.285.040(1); a qualifying utility's decision to pursue alternative compliance in RCW 19.285.040(2) (d) or (i) or 19.285.050(1); and the format and content of reports required in RCW 19.285.070. Nothing in this subsection may be construed to restrict the rate-making authority of the commission or a qualifying utility as otherwise provided by law.
     (3) The commission and department may coordinate in developing rules related to process, timelines, and documentation that are necessary for implementation of this chapter.
     (4)(a) Pursuant to the administrative procedure act, chapter 34.05 RCW, rules needed for the implementation of this chapter must be adopted by ((December 31, 2007)) June 30, 2010. These rules may be revised as needed to carry out the intent and purposes of this chapter.
     (b) Within six months of the adoption by the Pacific Northwest electric power and conservation council of each of its regional power plans, the commission and department shall adopt rules, according to subsections (1) and (2) of this section, to consider adopting any changes in methodologies used by the Pacific Northwest electric power and conservation council that would impact a qualifying utility's conservation potential assessment in accordance with RCW 19.285.040(1). If rules are adopted under this subsection, the rules are applicable to the next biennial target that is at least one year from the effective date of the rules.