BILL REQ. #:  S-1113.1 

Read first time 02/18/13.   Referred to Committee on Energy, Environment & Telecommunications.

     AN ACT Relating to encouraging qualifying utilities to invest in and own distributed solar energy systems; amending RCW 19.285.040, 82.16.110, 82.16.120, and 82.16.130; reenacting and amending RCW 19.285.030; adding a new section to chapter 80.28 RCW; creating a new section; and providing an expiration date.

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

NEW SECTION.  Sec. 1   (1) The legislature finds that:
     (a) Solar energy can play an increasingly constructive role in the state's electrical energy supply;
     (b) The state energy code is intended to result in the construction of increasingly energy efficient homes and buildings in order to help achieve a broader goal of building zero fossil-fuel greenhouse gas emission homes and buildings by 2031, an objective that can fundamentally undermine the financial stability of local electric utilities;
     (c) Current state policies are designed to promote distributed solar energy systems through a combination of taxpayer subsidies, in the form of an investment cost recovery incentive, and ratepayer subsidies, in the form of net metering and interconnection standards;
     (d) While the cost and efficiency of solar energy systems have improved over time, increased penetration of distributed solar energy systems has been hindered by several factors, including: (i) The higher cost of solar energy relative to the cost of general utility service, which in Washington is among the lowest in the country; (ii) the cost and feasibility of integrating distributed solar energy systems into utility operations; and (iii) the capability of customers to finance such systems themselves;
     (e) Electric utilities are best suited to identify where distributed solar energy systems can be located on their distribution and transmission networks to maximize their contribution to system operations and to minimize costs borne by utility customers; and
     (f) Electric utilities can finance the installation of distributed solar energy systems at a lower cost than individual customers or third-party developers.
     (2) The legislature declares that state policy should be reformed to promote the deployment of distributed solar energy generation in a manner that relies less on ratepayer subsidies and on cost-shifting among utility customers and more on utilizing current state policies and regulatory mechanisms to improve the cost-effectiveness of distributed solar energy systems and to empower the state's electric utilities to function as change agents and national leaders in the deployment of solar energy technologies.

Sec. 2   RCW 19.285.030 and 2012 c 22 s 2 are each reenacted and 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)(a) "Biomass energy" includes: (i) Organic by-products of pulping and the wood manufacturing process; (ii) animal manure; (iii) solid organic fuels from wood; (iv) forest or field residues; (v) untreated wooden demolition or construction debris; (vi) food waste and food processing residuals; (vii) liquors derived from algae; (viii) dedicated energy crops; and (ix) yard waste.
     (b) "Biomass energy" does not include: (i) Wood pieces that have been treated with chemical preservatives such as creosote, pentachlorophenol, or copper-chrome-arsenic; (ii) wood from old growth forests; or (iii) municipal solid waste.
     (4) "Commission" means the Washington state utilities and transportation commission.
     (5) "Conservation" means any reduction in electric power consumption resulting from increases in the efficiency of energy use, production, or distribution.
     (6) "Cost-effective" has the same meaning as defined in RCW 80.52.030.
     (7) "Council" means the Washington state apprenticeship and training council within the department of labor and industries.
     (8) "Customer" means a person or entity that purchases electricity for ultimate consumption and not for resale.
     (9) "Department" means the department of commerce or its successor.
     (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.
     (11) "Eligible renewable resource" means:
     (a) Electricity from a generation facility powered by a renewable resource other than freshwater 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;
     (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; and
     (c) Qualified biomass energy.
     (12) "Investor-owned utility" has the same meaning as defined in RCW 19.29A.010.
     (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.
     (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 emissions of pollutants to the air, soil, or water, and avoided emissions of carbon dioxide and other greenhouse gases.
     (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).
     (16) "Public facility" has the same meaning as defined in RCW 39.35C.010.
     (17) "Qualified biomass energy" means electricity produced from a biomass energy facility that: (a) Commenced operation before March 31, 1999; (b) contributes to the qualifying utility's load; and (c) is owned either by: (i) A qualifying utility; or (ii) an industrial facility that is directly interconnected with electricity facilities that are owned by a qualifying utility and capable of carrying electricity at transmission voltage.
     (18) "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.
     (19) "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 freshwater. 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.
     (20) "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; or (i) biomass energy.
     (21) "Rule" means rules adopted by an agency or other entity of Washington state government to carry out the intent and purposes of this chapter.
     (22) "Year" means the twelve-month period commencing January 1st and ending December 31st.
     (23) "Distributed solar energy system" means any device or combination of devices or elements that rely upon direct sunlight as an energy source for the production of thermal energy or for use in the generation of electricity from a facility that has an electrical generating capacity or thermal equivalent of not more than five kilowatts for a residential retail electric customer and one hundred kilowatts for a commercial retail electric customer and that is installed at a premises.
     (24) "Premises" means any residential property, commercial real estate, or lands, owned or leased by a retail electric customer within the service area of a single qualifying utility.

Sec. 3   RCW 19.285.040 and 2012 c 22 s 3 are each amended to read as follows:
     (1) Each qualifying utility shall pursue all available conservation that is cost-effective, 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. At least every two years thereafter, the qualifying utility shall review and update this assessment for the subsequent ten-year period.
     (b) Beginning January 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 target must be no lower than the qualifying utility's pro rata share for that two-year period of its 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. 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.
     (2)(a) Except as provided in (j) of this subsection, each qualifying utility shall use eligible renewable resources or acquire equivalent renewable energy credits, or any combination of them, to meet the following annual targets:
     (i) At least three percent of its load by January 1, 2012, and each year thereafter through December 31, 2015;
     (ii) At least nine percent of its load by January 1, 2016, and each year thereafter through December 31, 2019; and
     (iii) At least fifteen percent of its load by January 1, 2020, and each year thereafter.
     (b) Except as provided in subsection (4) of this section, 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.
     (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)(i) Beginning January 1, 2016, only a qualifying utility that owns or is directly interconnected to a qualified biomass energy facility may use qualified biomass energy to meet its compliance obligation under RCW 19.285.040(2).
     (ii) A qualifying utility may no longer use electricity and associated renewable energy credits from a qualified biomass energy facility if the associated industrial pulping or wood manufacturing facility ceases operation other than for purposes of maintenance or upgrade.
     (k) An industrial facility that hosts a qualified biomass energy facility may only transfer or sell renewable energy credits associated with its facility to the qualifying utility with which it is directly interconnected with facilities owned by such a qualifying utility and that are capable of carrying electricity at transmission voltage. The qualifying utility may only use an amount of renewable energy credits associated with qualified biomass energy that are equivalent to the proportionate amount of its annual targets under (a)(ii) and (iii) of this subsection that was created by the load of the industrial facility. A qualifying utility that owns a qualified biomass energy facility may not transfer or sell renewable energy credits associated with qualified biomass energy to another person, entity, or qualifying utility.
     (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.
     (4) In complying with the targets established in subsection (2)(a) of this section, a qualifying utility that owns a distributed solar energy system may count the output of that system according to the multiplier established as follows:
     (a) The commission shall adopt rules by August 31, 2013, and every two years thereafter, to establish a multiplier for electricity from distributed solar energy systems owned by an investor-owned utility. The multiplier must equalize the economic value of energy generated from distributed solar energy systems with the cost of acquiring utility scale wind energy to comply with the annual targets in subsection (2)(a) of this section. The cost basis for a distributed solar energy system must contain a return on investment for the investor-owned utility that is equal to the return that the commission has authorized for the company's other capital assets.
     (b) The governing body of a qualifying utility that is not an investor-owned utility may establish by August 31, 2013, and every two years thereafter, a multiplier for electricity from distributed solar energy systems owned by the utility. The multiplier must equalize the economic value of energy generated from distributed solar energy systems with the cost of acquiring utility scale wind energy by the utility to comply with the annual targets in subsection (2)(a) of this section.
     (c) For the purposes of this subsection, "cost of acquiring utility scale wind energy" means the value attributed to commercially available utility scale wind generation by a qualifying utility in its latest completed integrated resource plan under chapter 19.280 RCW.

Sec. 4   RCW 82.16.110 and 2011 c 179 s 2 are each amended to read as follows:
     The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Administrator" means an owner and assignee of a community solar project as defined in subsection (2)(a)(i) of this section that is responsible for applying for the investment cost recovery incentive on behalf of the other owners and performing such administrative tasks on behalf of the other owners as may be necessary, such as receiving investment cost recovery incentive payments, and allocating and paying appropriate amounts of such payments to the other owners.
     (2)(a) "Community solar project" means:
     (i) A solar energy system that is capable of generating up to seventy-five kilowatts of electricity and is owned by local individuals, households, nonprofit organizations, or nonutility businesses that is placed on the property owned by a cooperating local governmental entity that is not in the light and power business or in the gas distribution business;
     (ii) A utility-owned solar energy system that is capable of generating up to seventy-five kilowatts of electricity and 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; or
     (iii) A solar energy system, placed on the property owned by a cooperating local governmental entity that is not in the light and power business or in the gas distribution business, that is capable of generating up to seventy-five kilowatts of electricity, and that is owned by a company whose members are each eligible for an investment cost recovery incentive for the same customer-generated electricity as provided in RCW 82.16.120.
     (b) For the purposes of "community solar project" as defined in (a) of this subsection:
     (i) "Company" means an entity that is:
     (A)(I) A limited liability company;
     (II) A cooperative formed under chapter 23.86 RCW; or
     (III) A mutual corporation or association formed under chapter 24.06 RCW; and
     (B) Not a "utility" as defined in this subsection (2)(b); and
     (ii) "Nonprofit organization" means an organization exempt from taxation under 26 U.S.C. Sec. 501(c)(3) of the federal internal revenue code of 1986, as amended, as of January 1, 2009; and
     (iii) "Utility" means a light and power business, an electric cooperative, or a mutual corporation that provides electricity service.
     (3) "Customer-generated electricity" ((means)) includes:
     (a) A community solar project ((or));
     (b) A solar energy system that has a generating capacity of not more than one hundred kilowatts or its thermal equivalent, is owned by a qualifying utility, and is installed on the premises of a residential or commercial retail electric customer of the qualifying utility in Washington; or
     (c) The alternating current electricity that is generated from a renewable energy system located in Washington and installed on an individual's, businesses', or local government's real property that is also provided electricity generated by a light and power business. Except for community solar projects, a system located on a leasehold interest does not qualify under this definition. ((Except for utility-owned community solar projects, "customer-generated electricity" does not include electricity generated by a light and power business with greater than one thousand megawatt hours of annual sales or a gas distribution business.))
     (4) "Economic development kilowatt-hour" means the actual kilowatt-hour measurement of customer-generated electricity multiplied by the appropriate economic development factor.
     (5) "Local governmental entity" means any unit of local government of this state including, but not limited to, counties, cities, towns, municipal corporations, quasi-municipal corporations, special purpose districts, and school districts.
     (6) "Photovoltaic cell" means a device that converts light directly into electricity without moving parts.
     (7) "Renewable energy system" means a solar energy system, an anaerobic digester as defined in RCW 82.08.900, or a wind generator used for producing electricity.
     (8) "Solar energy system" means any device or combination of devices or elements that rely upon direct sunlight to produce thermal energy as an energy source for use in the generation of electricity.
     (9) "Solar inverter" means the device used to convert direct current to alternating current in a solar energy system.
     (10) "Solar module" means the smallest nondivisible self-contained physical structure housing interconnected photovoltaic cells and providing a single direct current electrical output.
     (11) "Stirling converter" means a device that produces electricity by converting heat from a solar source utilizing a stirling engine.
     (12) "Qualifying utility" has the same meaning as defined in RCW 19.285.030.

Sec. 5   RCW 82.16.120 and 2011 c 179 s 3 are each amended to read as follows:
     (1)(a) Any individual, business, local governmental entity, ((not in the light and power business or in the gas distribution business)) qualifying utility, or a participant in a community solar project may apply to the light and power business serving the situs of the system, each fiscal year beginning on July 1, 2005, for an investment cost recovery incentive for each kilowatt-hour from a customer-generated electricity renewable energy system.
     (b) In the case of a community solar project as defined in RCW 82.16.110(2)(a)(i), the administrator must apply for the investment cost recovery incentive on behalf of each of the other owners.
     (c) In the case of a community solar project as defined in RCW 82.16.110(2)(a)(iii), the company owning the community solar project must apply for the investment cost recovery incentive on behalf of each member of the company.
     (2)(a) Before submitting for the first time the application for the incentive allowed under subsection (4) of this section, the applicant must submit to the department of revenue and to the climate and rural energy development center at the Washington State University, established under RCW 28B.30.642, a certification in a form and manner prescribed by the department that includes, but is not limited to, the following information:
     (i) The name and address of the applicant and location of the renewable energy system.
     (A) If the applicant is an administrator of a community solar project as defined in RCW 82.16.110(2)(a)(i), the certification must also include the name and address of each of the owners of the community solar project.
     (B) If the applicant is a company that owns a community solar project as defined in RCW 82.16.110(2)(a)(iii), the certification must also include the name and address of each member of the company;
     (ii) The applicant's tax registration number;
     (iii) That the electricity produced by the applicant meets the definition of "customer-generated electricity" and that the renewable energy system produces electricity with:
     (A) Any solar inverters and solar modules manufactured in Washington state;
     (B) A wind generator powered by blades manufactured in Washington state;
     (C) A solar inverter manufactured in Washington state;
     (D) A solar module manufactured in Washington state;
     (E) A stirling converter manufactured in Washington state; or
     (F) Solar or wind equipment manufactured outside of Washington state;
     (iv) That the electricity can be transformed or transmitted for entry into or operation in parallel with electricity transmission and distribution systems; and
     (v) The date that the renewable energy system received its final electrical permit from the applicable local jurisdiction.
     (b) Within thirty days of receipt of the certification the department of revenue must notify the applicant by mail, or electronically as provided in RCW 82.32.135, whether the renewable energy system qualifies for an incentive under this section. The department may consult with the climate and rural energy development center to determine eligibility for the incentive. System certifications and the information contained therein are subject to disclosure under RCW 82.32.330(3)(l).
     (3)(a) By August 1st of each year application for the incentive must be made to the light and power business serving the situs of the system by certification in a form and manner prescribed by the department that includes, but is not limited to, the following information:
     (i) The name and address of the applicant and location of the renewable energy system.
     (A) If the applicant is an administrator of a community solar project as defined in RCW 82.16.110(2)(a)(i), the application must also include the name and address of each of the owners of the community solar project.
     (B) If the applicant is a company that owns a community solar project as defined in RCW 82.16.110(2)(a)(iii), the application must also include the name and address of each member of the company;
     (ii) The applicant's tax registration number;
     (iii) The date of the notification from the department of revenue stating that the renewable energy system is eligible for the incentives under this section; and
     (iv) A statement of the amount of kilowatt-hours generated by the renewable energy system in the prior fiscal year.
     (b) Within sixty days of receipt of the incentive certification the light and power business serving the situs of the system must notify the applicant in writing whether the incentive payment will be authorized or denied. The business may consult with the climate and rural energy development center to determine eligibility for the incentive payment. Incentive certifications and the information contained therein are subject to disclosure under RCW 82.32.330(3)(l).
     (c)(i) Persons, administrators of community solar projects, and companies receiving incentive payments must keep and preserve, for a period of five years, suitable records as may be necessary to determine the amount of incentive applied for and received. Such records must be open for examination at any time upon notice by the light and power business that made the payment or by the department. If upon examination of any records or from other information obtained by the business or department it appears that an incentive has been paid in an amount that exceeds the correct amount of incentive payable, the business may assess against the person for the amount found to have been paid in excess of the correct amount of incentive payable and must add thereto interest on the amount. Interest is assessed in the manner that the department assesses interest upon delinquent tax under RCW 82.32.050.
     (ii) If it appears that the amount of incentive paid is less than the correct amount of incentive payable the business may authorize additional payment.
     (4) Except for community solar projects and solar energy systems owned by qualifying utilities, the investment cost recovery incentive may be paid fifteen cents per economic development kilowatt-hour unless requests exceed the amount authorized for credit to the participating light and power business. For community solar projects and solar energy systems owned by qualifying utilities, the investment cost recovery incentive may be paid thirty cents per economic development kilowatt-hour unless requests exceed the amount authorized for credit to the participating light and power business. For the purposes of this section, the rate paid for the investment cost recovery incentive may be multiplied by the following factors:
     (a) For customer-generated electricity produced using solar modules manufactured in Washington state or a solar stirling converter manufactured in Washington state, two and four-tenths;
     (b) For customer-generated electricity produced using a solar or a wind generator equipped with an inverter manufactured in Washington state, one and two-tenths;
     (c) For customer-generated electricity produced using an anaerobic digester, or by other solar equipment or using a wind generator equipped with blades manufactured in Washington state, one; and
     (d) For all other customer-generated electricity produced by wind, eight-tenths.
     (5)(a) No individual, household, business, ((or)) local governmental entity, or qualifying utility is eligible for incentives provided under subsection (4) of this section for more than five thousand dollars per year.
     (b) Except as provided in (c) through (e) of this subsection (5), each applicant in a community solar project is eligible for up to five thousand dollars per year.
     (c) Where the applicant is an administrator of a community solar project as defined in RCW 82.16.110(2)(a)(i), each owner is eligible for an incentive but only in proportion to the ownership share of the project, up to five thousand dollars per year.
     (d) Where the applicant is a company owning a community solar project that has applied for an investment cost recovery incentive on behalf of its members, each member of the company is eligible for an incentive that would otherwise belong to the company but only in proportion to each ownership share of the company, up to five thousand dollars per year. The company itself is not eligible for incentives under this section.
     (e) In the case of a utility-owned community solar project, each ratepayer that contributes to the project is eligible for an incentive in proportion to the contribution, up to five thousand dollars per year.
     (6) If requests for the investment cost recovery incentive exceed the amount of funds available for credit to the participating light and power business, the incentive payments must be reduced proportionately.
     (7) The climate and rural energy development center at Washington State University energy program may establish guidelines and standards for technologies that are identified as Washington manufactured and therefore most beneficial to the state's environment.
     (8) The environmental attributes of the renewable energy system belong to the applicant, and do not transfer to the state or the light and power business upon receipt of the investment cost recovery incentive.
     (9) No incentive may be paid under this section for kilowatt-hours generated before July 1, 2005, or after June 30, 2020.

Sec. 6   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 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 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. Incentive payments claimed by a qualifying utility may only account for up to fifty percent of the total allowable credit. 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 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 immediately due and payable. The department shall assess interest but not penalties on the taxes against which the credit was claimed. Interest shall 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 accrue until the taxes against which the credit was claimed are repaid.
     (3) 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. 7   A new section is added to chapter 80.28 RCW to read as follows:
     (1) The commission shall adopt a rule by December 31, 2013, to enable and encourage electrical companies to acquire, install, and maintain cost-effective distributed solar energy systems, as that term is defined in RCW 19.285.030. The rule must allow an electrical company to earn a fair return on common equity and recover costs, including, but not limited to, the cost of debt incurred for investments made in the acquisition, installation, operation, and maintenance of distributed solar energy systems. The rule may require that a customer or class of customer contribute a reasonable amount to the electrical utility's cost of acquiring, installing, operating, and maintaining a distributed solar energy system at the retail electric customer's premises if necessary to ensure that the distributed solar energy system meets the requirement of being cost-effective. If a financial contribution is required of a customer, the rule must provide that such a contribution be paid to an electrical company under terms and conditions that will most readily accomplish the purpose of this section without increasing financial risk to the company's shareholders or other customers.
     (2) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
     (a) "Cost-effective" means, at the time a distributed solar energy system is placed in the rate base, the distributed solar energy system is reasonably expected to generate energy at a total incremental system cost per unit of energy delivered to end use that is less than or equal to the cost per unit of energy delivered to end use from utility scale wind generation, considering: (i) The value of an investment cost recovery incentive available to qualifying utility investments in distributed solar energy systems under RCW 82.16.120; (ii) the multiplier applied to distributed solar energy systems pursuant to RCW 19.285.040; (iii) the value of any renewable energy credits produced by distributed solar energy systems and sold by the electrical company; (iv) the value of any other state and federal tax credits that would derive from the production of energy from a distributed solar energy system; and (v) the financial contribution that may be required from a customer pursuant to subsection (1) of this section.
     (b) "Cost of acquiring utility scale wind energy" means the value attributed to commercially available utility scale wind generation by a qualifying utility in its last completed integrated resource plan under chapter 19.280 RCW.
     (3) This section expires December 31, 2020.

NEW SECTION.  Sec. 8   If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.