BP BHEAD INT S [atlas:bill]

AN ACT Relating to the restoration of investments in energy conservation, renewable resources, and low-income energy services; and adding a new chapter to Title 80 RCW.

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

NEW SECTION. Sec. 1. The legislature finds that:

(1) The state of Washington is affected by national, regional, and state-wide changes that are transforming the nature of the electric power industry;

(2) Washington has a long tradition of energy policies that support energy efficiency and renewable energy development. These policies have reduced air and water pollution and protected the environment, stimulated economic development, made homes more comfortable, reduced operating costs for businesses, and made industries more competitive;

(3) The Washington state electricity system study, commissioned by the 55th legislature through chapter 300, Laws of 1998, confirmed that current changes in the electric industry have had the unintended consequence of shortening utility planning horizons and reducing incentives for electric utilities to invest in energy conservation and renewable resources;

(4) The Washington state electricity system study also found that there are significant energy conservation resources that cost the same or less than the least costly new electric generation options and that while some nonhydroelectric renewable resources may not be cost-effective in the short-term, they provide significant environmental and energy system benefits to warrant development; and

(5) It is in the interest of Washington's economy and environment to have a competitively neutral and nonbypassable mechanism that will assure delivery of all cost-effective energy conservation, provide low-income households with energy efficiency services, and secure development of new nonhydroelectric renewable resources.

NEW SECTION. Sec. 2. The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.

(1) "Auditor" means the office of the state auditor.

(2) "Commission" means the Washington state utilities and transportation commission.

(3) "Consumer-owned utility" includes 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, a mutual corporation or association formed under chapter 24.06 RCW, a port district formed under Title 53 RCW, or a water-sewer district formed under Title 57 RCW, that is engaged in the business of distributing electricity to more than one retail electric customer in the state.

(4) "Department" means the department of community, trade, and economic development.

(5) "Direct service customer" means any end-user of electricity who obtains electricity directly from the transmission grid and not through a distribution utility, including those customers defined in section 3(8) of the Pacific Northwest electric power planning and conservation act, P.L. 96-501.

(6) "Distribution utility" means any investor-owned or consumer-owned utility that owns, operates, or manages any distribution plant for hire within this state.

(7) "Governing body" means the board of directors, city council, or the commissioners of any consumer-owned utility as defined in this section.

(8) "Investor-owned utility" means a corporation owned by investors that meets the definition of RCW 80.04.010 and is engaged in distributing electricity to more than one retail electric customer in the state.

(9) "Low-income energy efficiency services" includes repairs, weatherization, installation of energy-efficient appliances and fixtures for low-income residences, and investment in new construction of low-income households to exceed the state energy code, for the purpose of enhancing energy efficiency.

(10) "Low-income" means a household meeting eligibility guidelines for the federal low-income home energy assistance program.

(11) "New nonhydroelectric renewable resource" means a renewable resource, renewable resource project or addition to an existing renewable resource project, excluding electric generation facilities fueled by water, that is contracted by a consumer-owned utility or investor-owned utility after December 31, 1999 or starts operation after December 31, 1999.

(12) "Renewable resources" as defined in RCW 19.29A.010 means electricity generation facilities fueled by: (a) Water; (b) wind; (c) solar energy; (d) geothermal energy; (e) landfill gas; or (f) biomass energy based on solid organic fuels from wood, forest, or field residues or dedicated energy crops that do not include wood pieces that have been treated with chemical preservatives such as creosote, pentachlorophenol, or copper chrome arsenic.

(13) "System benefits charge" means a nonbypassable competitively neutral charge on all end-use electricity customers and direct service customers to fund investment in energy conservation, renewable resources, and low-income energy efficiency services.

(14) "Total annual revenues from the retail sale of electricity services in the state" means the total amount of revenues spent each year by Washington end-users for electricity services including distribution, transmission, generation, ancillary services, metering and billing, transition charges, and other types of costs included in consumer-owned utility or investor-owned utility electric rates on the effective date of this act.

NEW SECTION. Sec. 3. (1) Beginning July 1, 2001, and each year from July 1st to June 30th thereafter, a minimum annual state-wide energy conservation, renewable resources, and low-income energy efficiency services investment standard for investor-owned utilities, consumer-owned utilities, and direct service customers is established equal to at least three percent of the total annual revenues from the retail sale of electricity services in the state.

(2) Each Washington electricity distribution utility shall annually allocate at least three percent of the total annual revenues from the retail sale of electricity to consumers within its distribution service territory toward meeting this standard. Nothing in this chapter limits distribution utilities from exceeding this standard.

(3) Each direct service customer shall annually allocate at least three percent of its total expenditures for electric services toward meeting this standard. Nothing in this chapter limits direct service customers from exceeding this standard.

NEW SECTION. Sec. 4. (1) The appropriate nonbypassable collection mechanism to comply with the standard and allocation determination outlined in this chapter shall be determined by the commission for all distribution utilities under its jurisdiction. The mechanism must be nonbypassable for all customers regardless of energy supplier.

(2) All consumer-owned utilities will determine the appropriate nonbypassable collection mechanism to comply with the standard and allocation determination outlined in this chapter. The mechanism must be nonbypassable for all customers regardless of energy supplier.

(3) Any distribution utility that has fewer than seventeen customers per mile of line and has retail electric power rates that exceed the state average electric power rate as defined by the United States department of energy's energy information administration may, at its option, adopt a minimum standard less than the amount it is projected to collect under section 3 of this act, except that in no case may such a distribution utility spend less, on average, than one and one-half percent of revenues during the first five years after the effective date of this section.

(4) Each direct service customer shall annually forward to the distribution utility in the service territory of which the company is located an amount equal to the amount specified in section 3(3) of this act, less those funds qualifying under section 5(3) of this act. In determining its total annual expenditures for retail electric services, the direct service customer either shall rely on consumption and total revenue data from the 1994 report "Generation and Sales Statistics from the Bonneville Power Administration" or shall provide documentation to the department showing expenditure data for the most recent annual period ending June 30th. If a direct service customer chooses to provide expenditure data to the department, from that time forward, the customer may no longer rely on 1994 data. Documentation provided to the department is considered proprietary information. The department can report such information only in the aggregate for all direct service customers in the state.

NEW SECTION. Sec. 5. (1) Funds shall be allocated for the following purposes:

(a) Energy conservation measures, including but not limited to local conservation and regional market transformation efforts;

(b) New nonhydroelectric renewable resources, including new local and regional renewable energy projects and research, development, or demonstration projects; and

(2) The funds collected by investor-owned utilities and consumer-owned utilities under the minimum standard shall be expended as follows:

(a) 49.5 percent of the funds shall be allocated at the discretion of the distribution utility for purposes identified in subsection (1) of this section. The distribution utility may use a portion of these funds for administration and evaluation activities related to implementation of this act;

(b) 14 percent of the funds shall be invested in cost-effective regional energy efficiency market transformation activities. Distribution utilities contributing to the Northwest energy efficiency alliance through their Bonneville power administration rates will be credited an equivalent amount toward this portion of the charge;

(c) 12.5 percent of the funds shall be forwarded to the department for administering programs that provide low-income energy efficiency services. These funds may be distributed through the state-wide network of weatherization assistance program providers for weatherization of residences occupied by low-income households;

(d) 12.5 percent of the funds shall be devoted to the above market costs of the development and commercialization of new nonhydroelectric renewable resources, renewable resource research and development, and development and demonstration of distributed renewable resources;

(e) 11 percent of the funds shall be invested in cost-effective conservation; and

(f) .5 percent of the funds shall be forwarded to the department to fund its responsibilities set forth in this chapter.

(3)(a) Direct service customers and any end-use customer of a distribution utility that uses large amounts of electricity (defined as > 10 aMW per facility) shall receive credit for up to 36.5 percent of the minimum standard for the funds that it contributes to the distribution utility for local installation of energy efficiency measures, if the customer invests these funds in documented cost-effective conservation investments made in the customer's facilities. Such credit shall not include the customer's contribution to low-income energy efficiency service costs. If an independent audit determines there is no available conservation measure at the site that would have a simple payback of one and one-half to ten years, the customer shall receive the full credit of 36.5 percent of the minimum standard.

(i) The department will confirm that energy savings from the package of energy conservation measures implemented by a direct service customer has a cost less than or equal to the customer's avoided costs and each individual measure has simple payback greater than eighteen months. Upon determination, a customer may apply for a credit for those costs from the local distribution utility to whom they send their funds.

(ii) The distribution utility will confirm that energy savings from the package of energy conservation measures implemented by an end-use customer under (a) of this subsection has a cost less than or equal to the customer's avoided costs and each individual measure has simple payback greater than eighteen months. Upon determination, a customer may receive a credit for those costs from its distribution utility.

(b) A direct service customer and any end-use customer of a distribution utility that uses large amounts of electricity as defined in (a) of this subsection is eligible for a credit for up to 36.5 percent of the minimum standard for direct investments in new nonhydroelectric renewable resources for use within the customer's facility.

(c) A direct service customer contributing to the Northwest energy efficiency alliance through its Bonneville power administration rates is eligible for a credit for up to fourteen percent of the minimum standard.

NEW SECTION. Sec. 6. (1) On or before October 1, 2002, and annually thereafter, each investor-owned utility must demonstrate to the commission compliance with the minimum annual investment standard created in section 3 of this act for the annual period ending the previous June 30th.

(2) On or before October 1, 2002, and annually thereafter, each consumer-owned utility and direct service customer must demonstrate to the auditor, or by independent audit, compliance with the minimum annual investment standard created in section 3 of this act for the annual period ending the previous June 30th.

(3) Consumer-owned distribution utilities may demonstrate their compliance with the minimum investment standard "in the aggregate" by participating in collaborative/consortia efforts with other Washington consumer-owned distribution utilities.

(4) If the auditor or commission determines, within sixty days after receipt of utility compliance filing, that a utility has failed to collect funds to meet the minimum investment standard for the previous reporting period, the distribution utility shall immediately implement a tariff to collect a uniform nonbypassable system benefits charge. The tariff will collect revenue equivalent to achieving the minimum investment standard as if implemented according to section 3 of this act.

(5) If by July 1, 2003, and annually thereafter, the auditor or commission determines that a utility's compliance filing shows that less than ninety percent of funds collected to meet the minimum investment standard have been allocated for the purposes described in section 5 of this act and if the department has allocated more than ninety percent of the total funds forwarded to the department under section 5 of this act for administering programs that provide low-income energy efficiency services, the unallocated utility funds will be forwarded to the department for additional investment in low-income energy efficiency programs. Otherwise, unallocated funds will be carried over for expenditure by the utility in the following year.

(6) A commission-regulated distribution utility's expenses for the local conservation (excluding low-income energy efficiency services) portion of the funds must be for cost-effective conservation (based on avoided generation, transmission and distribution costs, and associated environmental externality costs) and approved and verified by the commission.

(7) A consumer-owned utility's expenses for the local conservation portion of the funds (excluding low-income energy efficiency services) must be for cost-effective conservation (based on avoided generation, transmission and distribution costs, and associated environmental externality costs) and approved and verified by the governing body.

(8) The department shall convene a group of stakeholders, including the commission, to advise on the development of criteria for energy conservation, market transformation and renewable energy expenditures, program implementation guidelines that qualify toward the minimum annual expenditure standard, and a dispute resolution process to address distribution utility or direct service customer complaints on findings of failure to comply with program implementation guidelines. The department will consider all existing and appropriate criteria and guidelines where applicable, and may rely on work of regional power planning committees in determining criteria and guidelines. The commission has the final authority to approve criteria and program implementation guidelines for the investor-owned utilities. The department shall adopt rules for reporting energy conservation and renewable resource expenditures and energy savings as applicable. No expenditures for power from renewable resource projects memorialized in contracts or memorandum of understandings before January 1, 2000, shall be eligible for meeting the minimum expenditure standard of this chapter.

(9) In the event that a consumer-owned utility fails to satisfy the program implementation guidelines developed in subsection (8) of this section, the department will issue a warning to the noncomplying utility and provide technical assistance to the utility to improve program effectiveness. After two consecutive years of unacceptable programs, the department will assume program responsibility and distribute funds for the noncomplying utility in accordance with the allocation formulas set forth in section 5 of this act, except that the funds to be used for local conservation, excluding low-income energy efficiency services, may, at the discretion of the department, be competitively bid to an energy service provider, to an energy conservation nonprofit organization, or to the noncomplying utility to be spent on energy conservation projects in the noncomplying utility's service territory until such time as the noncompliance is remediated. During this period of interim administration, the department will not make any commitments greater than three years of the local conservation funding it is administering.

(10) In the event that an investor-owned utility fails to satisfy the program implementation guidelines developed in subsection (8) of this section, the commission will issue a warning to the noncomplying utility and notify the department, which will provide technical assistance to the utility to improve program effectiveness. After two consecutive years of unacceptable programs, the department will assume program responsibility and distribute funds for the noncomplying utility in accordance with the allocation formulas set forth in section 5 of this act, except that the funds to be used for local conservation excluding low-income energy efficiency services, may, at the discretion of the department, be competitively bid to an energy service provider, to an energy conservation nonprofit organization, or to the noncomplying utility to be spent on energy conservation projects in the noncomplying utility's service territory until such time as the noncompliance is remediated. During this period of interim administration, the department will not make any commitments greater than three years of the local conservation funding it is administering.

NEW SECTION. Sec. 7. (1) On or before December 1, 2003, and biennially thereafter, the department shall submit a report to the legislature on the accomplishments of the investment standard created in this chapter and unachieved cost-effective opportunities, and make recommendations for revisions to the standard.

(2) On or before January 1, 2010, the department shall review and recommend continuation, modification, or discontinuation of the minimum investment standard based on an assessment of the effectiveness of the standard, market conditions, and unachieved opportunities.

NEW SECTION. Sec. 8. Sections 1 through 7 of this act constitute a new chapter in Title 80 RCW.