BILL REQ. #:  S-4113.2 

Read first time 02/03/14.   Referred to Committee on Energy, Environment & Telecommunications.

     AN ACT Relating to encouraging reliable distributed renewable energy; amending RCW 82.16.120; adding new sections to chapter 82.16 RCW; adding new sections to chapter 80.28 RCW; adding a new section to chapter 80.60 RCW; adding a new chapter to Title 19 RCW; and providing an effective date.

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

Sec. 101   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, 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).
     (c) Beginning July 1, 2014, no applicant may receive a certification for an incentive under this section.
     (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; and
     (v) A statement in the form of a signed affidavit to the light and power business serving the situs of the system of the amount of kilowatt-hours generated by the renewable energy system in the prior fiscal year. The amount of kilowatt-hours generated may be determined, at the option of the utility, from a reading of the inverter or production meter connected to the system.
     (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, 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, 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 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.

NEW SECTION.  Sec. 102   A new section is added to chapter 82.16 RCW to read as follows:
     The definitions in this section apply to part I of this act unless the context clearly requires otherwise.
     (1) "Administrator" means an owner and assignee of a community solar project as defined in subsection (3)(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) "Commission" means the housing and finance commission.
     (3)(a) "Community solar project" means:
     (i) The alternating current electricity from a solar energy system with a nameplate electrical generating capacity up to seventy-five kilowatts, that is owned by local individuals, households, nonprofit organizations, or nonutility businesses that is placed on the property owned by a cooperating local governmental entity or educational institution;
     (ii) The alternating current from a utility-owned solar energy system with a nameplate electrical generating capacity up to seventy-five kilowatts 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) The alternating current from a solar energy system, placed on the property owned by a cooperating local governmental entity or educational institution that is not in the light and power business or in the gas distribution business, with a nameplate electrical generating capacity up to seventy-five kilowatts, 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 section 103 of this act.
     (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"; 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.
     (4) "Customer-generator" has the same meaning as provided in section 202 of this act.
     (5) "Economic development kilowatt-hour" means the actual kilowatt-hour measurement of eligible electricity multiplied by the appropriate economic development factor.
     (6) "Eligible electricity" includes:
     (a) A community solar project;
     (b) The alternating current from a solar energy system that has a generating capacity of not more than one hundred kilowatts or its thermal equivalent, is owned by a utility, and is installed on the premises of a retail electric residential, commercial, nonprofit organization, or educational institution customer of the utility in Washington;
     (c) The alternating current electricity that is generated from a renewable energy system located in Washington and installed on an individual's, businesses', educational institution's, or local government's real property that is also provided electricity generated by a utility. Except for community solar projects, a system located on a leasehold interest does not qualify under this definition;
     (d) The alternating current from a project developed pursuant to a utility solar energy program; or
     (e) The alternating current from a leased energy system that has met the eligibility requirements in chapter 19.--- RCW (the new chapter created in section 401 of this act) to offer service to retail electric customers.
     (7) "Leased energy systems" has the same meaning as provided in section 202 of this act.
     (8) "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.
     (9) "Photovoltaic cell" means a device that converts light directly into electricity without moving parts.
     (10) "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.
     (11) "Solar energy system" means any device or combination of devices or elements that rely upon direct sunlight as an energy source for use in the generation of electricity.
     (12) "Solar inverter" means the device used to convert direct current to alternating current in a solar energy system.
     (13) "Solar module" means the smallest nondivisible self-contained physical structure housing interconnected photovoltaic cells and providing a single direct current electrical output.
     (14) "Stirling converter" means a device that produces electricity by converting heat from a solar source utilizing a stirling engine.
     (15) "Storage system" means a system or technology that can store electricity generated by a renewable energy system or systems at up to twenty percent of the maximum total daily output of the renewable energy system or systems to which the storage system is coupled. A storage system can be coupled to a renewable energy system on the premises where the system is located or can be coupled to multiple systems on any premises served by the distribution feeder where the renewable energy systems are located.
     (16) "Utility" means a consumer-owned utility or investor-owned utility as those terms are defined in RCW 19.280.020.
     (17) "Utility solar energy program" means a solar energy program that has been approved as provided in chapter 19.--- RCW (the new chapter created in section 401 of this act).

NEW SECTION.  Sec. 103   A new section is added to chapter 82.16 RCW to read as follows:
     (1)(a) Any individual, business, educational institution, utility, local governmental entity, or administrator or company owner of a community solar project may apply to the department, each fiscal year beginning July 1, 2014, for the department to authorize the utility serving the situs of the system to remit an annual investment cost recovery incentive for each economic development kilowatt-hour. Annual investment cost recovery incentives allowed under this subsection and paid for a system that is a leased energy system may not be assigned to a financial institution.
     (b) In the case of a community solar project, 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, 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 to the department for the first time the certification for the incentive allowed under subsection (1) of this section, the applicant must submit to the department of commerce an application for certification in a form and manner prescribed by the department of commerce 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) An affidavit that the premises on which the system applying for the incentive is not receiving any other incentive under RCW 82.16.120.
     (iv) That the electricity produced by the applicant meets the definition of eligible 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;
     (v) Storage system used, if any;
     (vi) A statement of the amount of eligible electricity and economic development kilowatt-hours expected to be generated by the renewable energy system and an estimate of the annual electrical use of the premises;
     (vii) That the electricity can be transformed or transmitted for entry into or operation in parallel with electricity transmission and distribution systems; and
     (viii) The date that the renewable energy system received or is expected to receive its final electrical permit from the applicable local jurisdiction.
     (b) Within thirty days of receipt of the application for certification and the final electrical permit from the local jurisdiction, the department of commerce must notify the applicant by mail, or electronically as provided in RCW 82.32.135, whether the renewable energy system qualifies and is certified for an incentive under this section. The department of commerce 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).
     (c) Once a system is certified by the department of commerce to be eligible for the incentive, that certification is good for ten years and may not be retroactively changed due to evolutionary standards or interpretations of the program administrators. Certification of a renewable energy system follows the system with the transfer of property.
     (3)(a) After a system is certified by the department of commerce, an initial application for the incentive under this section must be made to the participating utility serving the situs of the system in a form and manner prescribed by the department of commerce, after consultation with 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.
     (C) If the applicant is a utility, the person designated by the utility;
     (ii) The applicant's tax registration number; and
     (iii) The date of the notification from the department of commerce stating that the renewable energy system is certified and eligible for the incentives under this section.
     (b) Within sixty days of receipt of the incentive certification the utility serving the situs of the system must notify the applicant, the department of commerce, and the department in writing whether the incentive payment will be authorized or denied by the utility. The department must confirm that the incentive payment due will not exceed the credit allowed to the utility in section 104 of this act.     
     (c) By August 1st of each year after the application has been authorized by the utility as required under (b) of this subsection, persons must provide a statement in the form of a signed affidavit to the department of the amount of eligible kilowatt-hours generated by, and the amount of economic development kilowatt-hours attributable to, the renewable energy system in the prior fiscal year. The amount of eligible electricity generated, in kilowatt-hours, may be determined from a reading of the inverter or production meter connected to the system. The amount of economic development kilowatt-hours may be calculated by the amount of eligible electricity multiplied by the multipliers certified in the system certification.
     (d) The department must calculate, and provide to the utility, the amount of the incentive payment due to each utility customer, utility, and community solar project, located on the premises serviced by that utility and the total amount of credit for each utility against tax due under this chapter.
     (e)(i) Persons, administrators of community solar projects, utilities, 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 department. If upon examination of any records or from other information obtained by the department it appears that an incentive has been paid in an amount that exceeds the correct amount of incentive payable, the department 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 and may assess penalties on the amount. Interest and penalties are assessed in the manner that the department assesses penalties and 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 department may authorize additional payment to the customer-generator and additional credit due to the utility.
     (4) Once a system is certified by the department of commerce and has been authorized by and has signed an interconnection agreement with the utility serving the situs of the system, it will be considered to have commenced operation. The eligible electricity base rate used to calculate the investment cost recovery incentive, payable for a period of ten years, must be based on the year in which the system commenced operation as follows:
     2014: $0.15
     2015: $0.14
     2016: $0.13
     2017: $0.12
     2018: $0.11
     (5) For the purposes of this section, the rate paid for the investment cost recovery incentive is determined by multiplying the eligible electricity base rate by the following factors:
     (a) For eligible electricity produced using solar modules manufactured in Washington state or a solar stirling converter manufactured in Washington state, two and four-tenths;
     (b) For eligible electricity produced using a solar or a wind generator equipped with an inverter manufactured in Washington state, one and two-tenths;
     (c) For eligible electricity produced using an anaerobic digester, or by other solar equipment or using a wind generator equipped with blades manufactured in Washington state, one;
     (d) For all other eligible electricity produced by wind, eight-tenths; and
     (e) For eligible electricity using a storage system, seven-tenths.
     (6)(a) No individual, household, business, educational institution, local government entity, or utility is eligible for incentives under this section for otherwise eligible electricity generated in excess of the net kilowatt-hours consumed annually at the metered location.
     (b) For projects that are not community solar projects, no person is eligible for annual incentive payments provided under this section for more than the following amounts per system:
     (i) 0-10 kilowatts - $5,000
     (ii) 11-25 kilowatts - $15,000
     (iii) 26–30 kilowatts - $20,000
     (iv) 31-75 kilowatts - $25,000
     (c) Except as provided otherwise in (d) through (f) of this subsection (6), each owner or member in a community solar project is eligible for up to five thousand dollars per year.
     (d) Where the applicant is an administrator of a community solar project, 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.
     (e) 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.
     (f) 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.
     (7) The climate and rural energy development center at Washington State University extension energy program, after consultation with the department of commerce, may establish nonbinding guidelines and standards for technologies that are identified as Washington manufactured and therefore most beneficial to the state's environment. Nothing in this subsection is intended to preempt the department of commerce's authority to certify the eligibility of Washington manufactured technologies and each individual system for the amount of incentives for which they are eligible.
     (8) The environmental attributes of the renewable energy system belong to the applicant.
     (9) No incentive may be paid under this section for kilowatt-hours generated by a system that commences operation before July 1, 2014, or for kilowatt-hours generated by a system that commences operation after December 31, 2018.
     (10) No incentive may be paid under this section for a leased energy system beginning operation after June 30, 2014, that is net metered under chapter 80.60 RCW, unless the leased energy system qualifies for net metering under section 305 of this act.
     (11) Each system qualifying for incentives under this section must have a production meter that interconnects with the utility's system in a manner that allows the electric meter measuring consumption to measure the total amount of electricity consumed on the premises.

NEW SECTION.  Sec. 104   A new section is added to chapter 82.16 RCW to read as follows:
     (1) Beginning July 1, 2014, a utility must 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 section 103 of this act. The credit must be taken in a form and manner as required by the department. The sum of credits under this section and credits allowed under RCW 82.16.120 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 two hundred fifty thousand dollars, whichever is greater. Incentive payments to participants in a utility-owned community solar project, beginning operation after July 1, 2014, may only account for up to five percent of the total allowable credit. Incentive payments to participants in a company-owned community solar project, beginning operation after July 1, 2014, 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. Incentive payments claimed by a utility for utility solar projects may only account for up to forty-five percent of the total allowable credit.
     (2) Incentive payments for systems greater than ten kilowatts may not claim more than fifty percent of the total allowable credit.
     (3) Refunds 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.
     (4) For any person that has claimed credit for incentive payment amounts that exceed the correct amount of the incentive payable under section 103 of this act, the amount of tax against which credit was claimed for the excess payments are immediately due and payable. The department must assess interest and may assess penalties on the taxes against which the credit was claimed. Interest must be assessed at the rate provided for delinquent excise taxes under chapter 82.32 RCW, retroactively to the date the amount of economic development kilowatt-hours generated was filed with the department, and accrue until the excess incentive payment against which the economic development kilowatt-hour production filing was claimed, are repaid.
     (5) The right to earn tax credits and incentive payments under this section expires for renewable energy systems beginning operation after December 31, 2018. Credits and incentives may not be claimed for economic development kilowatt-hours generated after December 31, 2028.

NEW SECTION.  Sec. 201   It is the intent of the legislature to provide mechanisms for low-cost financing of energy systems on the distribution side of the electricity grid, to provide for consumer protection of customers of these systems, and to recognize electric utility efforts in being early adopters of programs that encourage energy independence by customers.

NEW SECTION.  Sec. 202   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Customer-generator" means a user of a net metering system, as that term is defined in RCW 80.60.010, or a leased energy system that owns and is a customer of the electric utility serving the premises on which the net metering or leased energy system is located. A customer-generator may own and use a net metering system or have all or a portion of their electricity needs on their premises served by a leased energy system, or otherwise have all or a portion of their electricity needs on the premises served by a renewable energy system sized to meet approximately all or a portion of their electricity needs.
     (2) "Electric utility" means a consumer-owned utility or investor-owned utility as those terms are defined in RCW 19.280.020.
     (3) "High efficiency cogeneration" means 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.
     (4) "Leased energy system" means a renewable energy system:
     (a) That is located in Washington;
     (b) That is installed on real property that is not leased and is provided electricity by an electric utility;
     (c) In which, on an annual basis, the net electricity fed back into the distribution system of the electric utility is less than or approximately equal to the electricity consumed on the premises where the leased energy system is located; and
     (d) That is a renewable energy system that is either owned by:
     (i) An electric utility; or
     (ii) A third-party vendor.
     (5) "Net metering system" has the same meaning as provided in RCW 80.60.010.
     (6) "Renewable energy system" means a system that generates electricity from: (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; (i) biomass energy; or (j) high efficiency cogeneration.
     (7) "Third-party vendor" means a private entity, which is not an electric utility, that for financial remuneration provides a customer-generator with electricity for use on the premises of the customer-generator. This form of transaction for electricity or power may include: A lease of generating equipment by the vendor to the customer-generator; a power purchase agreement where the vendor is compensated according the kilowatt-hours delivered to the customer-generator; a lease from the customer-generator to the vendor and a sale of power by the vendor back to the customer-generator; or other compensation for the delivery of electricity to the customer-generator by the vendor.
     (8) "Value of solar" means the benefit that a net metering or leased energy system that uses solar energy as a fuel provides to a utility's customers and distribution system. Such value may include, but is not limited to: Environmental attributes of the solar energy generation; reduced or displaced greenhouse gases and other regulated air emissions; distribution system benefits or impacts; need of the utility for power, including the need for the time-of-day generation provided by solar energy systems; recovery of the fixed costs of the utility; and avoided power costs. The "value of solar" may not be greater than the bundled retail electric rate paid by the customer-generator at the premises, where the net metering system is located.

NEW SECTION.  Sec. 203   (1) An electric utility may offer a solar energy program or leased energy system program that provides customers access to solar energy systems on their property. A third-party vendor may offer a leased energy system program to utility customers pursuant to this chapter.
     (2) An electric utility or third-party vendor that offers a leased energy system program to customer-generators must ensure open and fair access through competitive bidding of systems and licensed contractors for installation of these systems. The electric utility or third-party vendor must ensure a reasonable price for leases or electricity purchases through the use of a skilled local work force and a diversity of businesses in implementing the program.

NEW SECTION.  Sec. 204   (1) If an electric utility offers a solar energy program that may include a leased energy system program to at least their residential rate class and one additional customer class, no third-party vendor may offer a leased energy system directly to that utility's customers.
     (2) An electric utility seeking to establish a solar energy program may submit a program design to the commission for investor-owned utilities and the appropriate governing board for consumer-owned utilities, for approval.
     (3) If a leased energy system program is included in the program design, the leased energy system program design must include the following:
     (a) A fair market value purchase option at the end of the term of the contract;
     (b) A reasonable process for transferring the obligation with a change of ownership of the underlying property that:
     (i) For a utility program, does not place the utility's other ratepayers at risk of assuming that obligation; and
     (ii) For a third-party vendor program, a process that does not unduly restrict the change of ownership; and
     (c) A proposed list of financing models included in the program. However, a program may include any, or all, lease or power purchase financing models.
     (4) The commission for investor-owned utilities and the appropriate governing boards for consumer-owned utilities must consider the submitted program design for approval within a reasonable time.
     (5) Upon approval, the commission for investor-owned utilities and the appropriate governing boards for consumer-owned utilities must publish a list of lease options, purchasing options, or other solar energy program options being offered by the utility.
     (6) If an electric utility chooses not to submit a solar energy program design to the commission or appropriate governing board, as described in this section within one year of the effective date of this section, or if submitted, the commission or appropriate governing board has not approved a program design within two years from the effective date of this section, a third-party vendor may offer leased energy systems directly to that utility's customers, compliant with sections 302 through 304 of this act.
     (7) In addition to complying with the provisions of sections 302 through 304 of this act and subsection (3) of this section, a third-party vendor must demonstrate a net benefit to the customer-generator at the conclusion of the contract for the leased energy system.

NEW SECTION.  Sec. 205   (1) Notwithstanding RCW 80.60.040(3), an electric utility may require additional insurance or other form of indemnification from the customer-generator or third-party vendor for leased energy systems. Such indemnification must hold the electric utility harmless, and the electric utility is not liable, for any harm, economic or otherwise, caused to the customer-generator or third-party vendor for disconnection of the leased energy system or the customer-generator's meter. Such disconnection may be for safety reliability purposes, faulty leased energy system equipment, nonpayment of an electric bill to the utility by the customer-generator, or any other action by a utility that affects a contract or agreement between the customer-generator and a third-party vendor, or violation by the customer-generator or third-party vendor of the interconnection agreement between the utility and customer-generator.
     (2) Notwithstanding RCW 80.60.040(3), an electric utility may require leased energy systems to comply with additional safety and performance standards as a condition of interconnection to the utility's distribution system.

NEW SECTION.  Sec. 206   (1) The legislature finds that it is in the public interest to provide opportunity for utilities to be providers of solar energy programs that may include leased energy systems to their customers, and facilitate the deployment of leased energy systems and solar energy programs to utility customers that are occupants of residential or commercial premises. The legislature further finds that it is in the public interest for electric utilities to lead in the deployment of solar energy programs that may include leased energy systems to maximize the system reliability and power quality benefits, and minimize the system reliability and power quality impacts caused by the location and placements of solar energy facilities.
     (2) A utility is allowed to provide a solar energy program, which may include leased energy systems to its customers where it provides distribution service to the situs.
     (a) For electrical companies, the commission may adopt rules to implement this section. The rules must require an option for the utility customer to purchase a leased energy system at fair market value subsequent to the utility's recovery of its investment and any incentives the system may be eligible for.
     (b) For consumer-owned utilities, the governing board may adopt policies to own, lease, and operate electrical generating facilities, or otherwise provide solar energy programs to their customers to implement this section. The policy must include an option for the utility customer to purchase a leased energy system at fair market value subsequent to the utility's recovery of its investment and any incentives for which the system may be eligible.
     (3) If a utility has established a solar energy program or leased energy system program within two years of the effective date of this section, third-party vendors are not allowed to offer leased energy systems directly to the utility's customers.
     (4) If a utility has not established a solar energy program within two years of the effective date of this section, private third-party vendors are allowed to offer leased energy systems directly to that utility's customers.

NEW SECTION.  Sec. 301   A new section is added to chapter 82.16 RCW to read as follows:
     (1) The 1egislature finds that deploying solar energy systems and leased energy systems encourages energy independence by customers. The legislature further finds that the benefits of energy independence do not justify that incentives provided by the taxpayers of the state and customers of utilities to leased energy systems should overlap.
     (2) Leased energy systems that apply for and collect incentives under this chapter are not eligible as a net metering system in chapter 80.60 RCW. However, a utility may choose to allow the leased energy system to qualify as a net metering system under section 305 of this act.
     (3) Leased energy systems that choose to qualify as net metering systems under RCW 80.60.010 are not eligible for renewable incentives under this chapter, unless the leased energy system is qualified for net metering under section 305 of this act.

NEW SECTION.  Sec. 302   A new section is added to chapter 80.28 RCW to read as follows:
     (1) The legislature finds that:
     (a) Third-party vendors of leased energy systems are competitive electrical companies and are subject to the jurisdiction of the commission.
     (b) A competitive marketplace with effective competition exists for offering leased energy systems to retail consumers of electricity in the state of Washington.
     (c) Traditional rate of return, rate base regulation of competitive electrical companies providing leasing and installation of leased energy systems may not provide the most efficient and effective means of achieving the public policy goals of this state as declared in RCW 80.28.024, 80.28.074, and this section. The commission is authorized to employ an alternative form of regulation if that alternative is better suited to achieving those policy goals.
     (d) The commission should retain its authority to protect consumers of nonutility-owned leased energy systems from unreasonable deceptive practices. Nothing in this act precludes the office of the attorney general from exercising its statutory authority concerning consumer protection.
     (2) The definitions in section 202 of this act apply to this section.

NEW SECTION.  Sec. 303   A new section is added to chapter 80.28 RCW to read as follows:
     (1) A third-party vendor, which is not an electric utility, must register with the commission as a competitive electrical company before beginning operations in this state to offer leased energy systems to retail electric customers of a utility. The registration must be on a form prescribed by the commission and contain that information as the commission may by rule require, but must include at a minimum: The name and address of the company; the name and address of the company's registered agent, if any; the name, address, and title of each officer or director; the company's most current balance sheet; the company's latest annual report, if any; and a description of the services the company offers or intends to offer.
     (2) The commission may require as a precondition to registration the procurement of a performance bond sufficient to cover any advances or deposits the electrical company may collect from its customers or order that the advances or deposits be held in escrow or trust.
     (3) The commission may deny registration to any third-party vendor that:
     (a) Does not provide the information required by this section;
     (b) Fails to provide a performance bond, if required;
     (c) Does not possess adequate financial resources to provide the proposed service; or
     (d) Does not possess adequate technical competency to provide the proposed service.
     (4) The commission must take action to approve or issue a notice of hearing concerning any application for registration within thirty days after receiving the application. The commission may approve an application with or without a hearing. The commission may deny an application after a hearing.
     (5) The commission must adopt rules that describe:
     (a) The manner by which the commission will regulate third-party vendors as competitive;
     (b) The process for considering applications for registration under this title; and
     (c) The penalties pursuant to chapter 80.04 RCW, including revocation of registration of competitive electric companies.
     (6) Rules adopted under this section may not include or provide any standards for jurisdiction over the interconnection of the system to a utility's distribution system that remains with the commission for interconnection to an investor-owned utility and with the appropriate governing boards for interconnection to the distribution system of consumer-owned utilities as otherwise adopted by the commission or governing board of a consumer-owned utility.
     (7) The definitions in section 202 of this act apply to this section.

NEW SECTION.  Sec. 304   A new section is added to chapter 80.28 RCW to read as follows:
     (1) Third-party vendors are competitive electrical companies under this chapter and must be subject to a minimum level of regulation. A third-party vendor must at a minimum:
     (a) Keep its accounts according to regulations as determined by the commission;
     (b) File financial reports with the commission as required by the commission and in a form and at times prescribed by the commission;
     (c) Post its prices on a public web site available to all potential customers; and
     (d) Cooperate with commission investigations of customer complaints.
     (2) Third-party vendors must pay regulatory fees to the commission under chapter 80.24 RCW.

NEW SECTION.  Sec. 305   A new section is added to chapter 80.60 RCW to read as follows:
     (1) The legislature recognizes that most homes and businesses with renewable distributed generation systems are also interconnected to the local distribution system of an electrical company and utilize the system for safe and reliable electric service. Without a separate rate for customer-generators, fixed costs incurred by the electric utility to connect customer-generators are shifted to nonparticipating customers within the utility's entire customer base. An electric utility may file a rate for customer-generators to mitigate such cost-shifting for approval by the commission, in the case of an electrical company, or the appropriate governing body, in the case of other electric utilities.
     (2) Consistent with the other provisions of this chapter, for all net metering and leased energy systems interconnected to a utility's distribution system subsequent to reaching the cumulative generating capacity cap of 0.5 percent in RCW 80.60.020(1), an electric utility may:
     (a) Charge the customer-generator a monthly fee that is different than that charged for other customers of the utility in the same rate class, as determined by the commission, in the case for an electrical company, or the appropriate governing body in the case of other electric utilities. The monthly fee may include standby, customer, demand, capacity, interconnection, or other fees or charges, and must ensure that all costs caused by the net metering system or leased energy system are paid by the customer-generator, and ensure that costs are not shifted within any rate class from net metered customers in that rate class to nonnet metered customers in that rate class; or
     (b) Credit the customer-generator a value of solar as established by the commission in the case of electrical companies, or the appropriate governing body in the case of other electric utilities, times the number of kilowatt-hours generated by the net metering or leased energy system that uses solar energy as a fuel. The credit must be applied to a customer-generator's monthly bill, and may not result in any compensation to the customer-generator at the end of the annual period pursuant to RCW 80.60.030.
     (3) If implementing net metering credits under this section:
     (a) An electric utility must measure the electricity consumed during the billing period, in accordance with normal metering practices, and through a separate production meter installed by the customer-generator and connected to the distribution system, the electricity generated by the net metering or leased energy system;
     (b) The customer-generator must be billed for the electricity supplied by the electric utility, in accordance with normal metering and billing practices; and
     (c) The customer-generator must be credited for the kilowatt-hours generated during the billing period pursuant to subsection (2) of this section, with this kilowatt-hour credit appearing on the bill for the following billing period, or annually, as determined by the utility.

NEW SECTION.  Sec. 401   Part II of this act constitutes a new chapter in Title 19 RCW.

NEW SECTION.  Sec. 402   Part I of this act takes effect July 1, 2014.