BILL REQ. #:  H-1276.2 

Read first time 02/01/11.   Referred to Committee on Technology, Energy & Communications.

     AN ACT Relating to standard offer contracts to eligible clean energy facilities; amending RCW 82.16.130; adding a new chapter to Title 80 RCW; and providing an effective date.

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

NEW SECTION.  Sec. 1   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Consumer-owned utility" means a municipal electric utility formed under Title 35 RCW, a public utility district formed under Title 54 RCW, an irrigation district formed under chapter 87.03 RCW, a cooperative formed under chapter 23.86 RCW, or a mutual corporation or association formed under chapter 24.06 RCW, that is engaged in the business of distributing electricity to more than one retail electric customer in the state.
     (2) "Electric utility" means a consumer-owned or investor-owned utility.
     (3) "Eligible clean energy facility" means a facility located in Washington capable of generating no more than two megawatts of electricity that generates electricity from a net metering system as defined in RCW 80.60.010 or from distributed generation as defined in RCW 19.285.030.
     (4) "Investor-owned utility" means an electrical company, as the term "electrical company" is defined in RCW 80.04.010, owned by investors and that is engaged in distributing electricity to more than one retail electric customer in the state.
     (5) "Off-peak hours" means the period of the day after 7:00 p.m. and before 11:00 a.m.
     (6) "Owner" includes: Any residential, commercial, or industrial customer of an electric utility located in Washington; an independent power producer; a business; an electric utility; an independent power producer; a federal, state, or local government; a tribal government and its political subdivisions; or a nonprofit agency that owns an eligible clean energy facility.
     (7) "Peak hours" means the period of the day between 11:00 a.m. until 7:00 p.m.
     (8) "Standard offer contract" means a contract offered by an electric utility to an owner of an eligible clean energy facility that governs the terms and conditions of the sale of electricity generated from the facility to the electric utility.

NEW SECTION.  Sec. 2   (1)(a) Beginning January 1, 2012, an electric utility must make available, twice a year for five years, standard offer contracts to eligible clean energy facilities awarded through a competitive clean energy auction.
     (b) An electric utility must conduct clean energy auctions until the cumulative generating capacity of eligible clean energy facilities equals one percent of the utility's peak demand during 2007.
     (c) An electric utility must offer annually no less than twenty percent of the cumulative generating capacity available to the electric utility.
     (d) Electric utilities must conduct the twice a year clean energy auctions on April 1st and October 1st of each year.
     (e) In 2016, an electric utility must offer through a clean energy auction all remaining cumulative generating capacity available to the electric utility.
     (2)(a) At a minimum, an electric utility must provide a standard offer contract rate in kilowatt hours that is equal to the highest rate in kilowatt hours that the electric utility paid for electricity in the previous calendar year through a negotiated power purchase agreement. At a maximum, the standard offer contract rate may not exceed ninety cents per kilowatt hour. An electric utility must take the electricity awarded through the clean energy auction process for the duration of the standard offer contract. A standard offer contract may not exceed fifteen years in duration.
     (b) An electric utility may weight auctions to favor generation that operates during peak demand periods.
     (3) When submitting a bid as part of a clean energy auction, an owner must state the length of the contract desired in the owner's bid. The electric utility must accept bids with the shortest length of time first.
     (4)(a) An electric utility must prioritize the interconnection to its distribution system eligible clean energy facilities that have received standard offer contracts from the electric utility.
     (b) An electric utility must purchase, and the owner must transmit as a priority, the electricity produced from the eligible clean energy facility.
     (c) By January 1, 2012, an electric utility must develop, publish, and provide transparent and nondiscriminatory rules and forms for interconnecting eligible clean energy facilities to the distribution system of the electric utility and apply these standard rules for interconnecting clean energy systems to its distribution system.
     (5) An electric utility must distribute the cost of the electricity purchased from clean energy facilities through the clean energy auction process evenly across all customer classes.
     (6) An electric utility is eligible to own an eligible clean energy facility, participate as an owner in clean energy auctions, and receive a standard offer contract if it is the lowest bidder. An electric utility's share of the cumulative generating capacity specified under subsection (1)(b) of this section is limited to twenty percent for eligible clean energy facilities in which it owns a controlling interest.
     (7) On a real-time basis, electric utilities must make information available on preferred distribution substations based on the available capacity of that substation.
     (8) All electric utilities must make every reasonable effort to standardize their auction processes, standard offer contracts, interconnection applications and procedures, and other processes and forms as needed. Electric utilities must strive to have the same forms, format, and substantially common language.
     (9)(a) Electric utilities must offer standard offer contracts that specify the minimum content of an eligible clean energy facility that is manufactured in the countries that are parties to the North America free trade agreement and make these minimum content requirements available to owners and the public.
     (b) For eligible clean energy facilities with over ten kilowatts in generating capacity that use wind to generate electricity, the minimum content under (a) of this subsection is twenty-five percent before January 1, 2013, and fifty percent on or after January 1, 2013.
     (c) For eligible clean energy facilities with over ten kilowatts in generating capacity that use solar photovoltaics to generate electricity, the minimum content under (a) of this subsection is fifty percent before January 1, 2013, and sixty percent on or after January 1, 2013.
     (10)(a) An owner is not eligible to enter into a standard offer contract with an electric utility if the owner is participating in the investment cost recovery incentive payment program under chapter 82.16 RCW. An owner is eligible to bid in a clean energy auction and receive a standard offer contract if the owner withdraws from participating in the investment cost recovery incentive payment program under chapter 82.16 RCW.
     (b) An electric utility may continue to receive the annual public utility tax credit under chapter 82.12 RCW.
     (11)(a) Before bidding in a clean energy auction, an owner must have filed an interconnection application with the electric utility holding a clean energy auction.
     (b) An owner must ensure that an eligible clean energy facility will be online within eighteen months of the effective date of the standard offer contract.
     (c) Owners are required to submit a project development security deposit of twenty dollars per kilowatt upon execution of the standard offer contract. The project development security deposit must be refunded once the facility is delivering electricity to the electric utility. The owner forgoes the project development security deposit if the facility fails to deliver electricity as specified in the standard offer contract within eighteen months.
     (d) Owners are allowed a one-time six-month extension if the facility can successfully demonstrate that the cause of the facility delay was due to regulatory processes, such as transmission or generator permitting, or interconnection. An owner must demonstrate that any regulatory delays were outside of the owner's control by showing that the necessary applications and fees were filed and paid on time. A delay due to business risk, such as lack of facility financing or equipment delivery, is not a justification for granting an extension of the facility's operation date.
     (e) In order to be eligible to participate in a clean energy auction, an owner must have previously completed at least one project of similar technology and generating capacity or begun construction of at least one other similar project.
     (f) An owner must have site control through direct ownership of the property, a lease, or an option to lease or purchase site control that would be exercised upon award of a standard offer contract.
     (g) All electricity generated by an eligible clean energy facility must be supplied to the distribution system of the electric utility.
     (h) No single owner may contract for more than fifty percent of the capacity available for each auction.
     (i) Owners are allowed to bid in multiple clean energy auctions. If this results in an eligible clean energy facility being selected by more than one electric utility, the owner must inform all interested electric utilities within five calendar days of which electric utility it intends to enter into a standard offer contract.
     (j) An owner must execute the standard offer contract within fifteen calendar days of the date the electric utility notifies the winning bidders.
     (k) An owner is responsible for the cost of equipment needed to connect the eligible clean energy facility to the distribution system of an electric utility.
     (l) An owner is responsible for the cost of equipment necessary to meet applicable safety, power quality, and interconnection requirements.

Sec. 3   RCW 82.16.130 and 2010 c 202 s 3 are each amended to read as follows:
     (1) A light and power business ((shall be)) is allowed a credit against taxes due under this chapter in an amount equal to investment cost recovery incentive payments made in any fiscal year under RCW 82.16.120. The credit ((shall)) must be taken in a form and manner as required by the department. The credit under this section for the fiscal year may not exceed one-half percent of the businesses' taxable power sales due under RCW 82.16.020(1)(b) or one hundred thousand dollars, whichever is greater. Incentive payments to participants in a utility-owned community solar project as defined in RCW 82.16.110(2)(a)(ii) may only account for up to twenty-five percent of the total allowable credit. Incentive payments to participants in a company-owned community solar project as defined in RCW 82.16.110(2)(a)(iii) may only account for up to five percent of the total allowable credit. The credit may not exceed the tax that would otherwise be due under this chapter. Refunds ((shall)) may not be granted in the place of credits. Expenditures not used to earn a credit in one fiscal year may not be used to earn a credit in subsequent years.
     (2) For any business that has claimed credit for amounts that exceed the correct amount of the incentive payable under RCW 82.16.120, the amount of tax against which credit was claimed for the excess payments ((shall be)) are immediately due and payable. The department ((shall)) must assess interest but not penalties on the taxes against which the credit was claimed. Interest ((shall)) must be assessed at the rate provided for delinquent excise taxes under chapter 82.32 RCW, retroactively to the date the credit was claimed, and ((shall)) accrues until the taxes against which the credit was claimed are repaid.
     (3) If the investment cost recovery incentive payments made by a light and power business under RCW 82.16.120 in any fiscal year are reduced due to a withdrawal by a participant in the renewable energy cost recovery program in order for that participant to receive a standard offer contract under section 2 of this act, the light and power business remains entitled to the credit under this section in an amount equal to the investment cost recovery payments made to such participant immediately prior to the participant's withdrawal from the program.
     (4) The right to earn tax credits under this section expires June 30, 2020. Credits may not be claimed after June 30, 2021.

NEW SECTION.  Sec. 4   This act takes effect August 1, 2011.

NEW SECTION.  Sec. 5   Sections 1 and 2 of this act constitute a new chapter in Title 80 RCW.