S-2032

AN ACT Relating to diversification of state electricity supply and demand management; amending RCW 80.60.005 and 80.60.010; adding new sections to chapter 80.60 RCW; adding a new section to chapter 43.21F RCW; adding a new section to chapter 80.28 RCW; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; adding a new section to chapter 82.16 RCW; creating new sections; and providing expiration dates.

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

NEW SECTION. Sec. 1. This chapter may be known and cited as the diversification of electricity supply and demand management act.

Sec. 2. RCW 80.60.005 and 1998 c 318 s 1 are each amended to read as follows:

The legislature finds that it is in the public interest to:

(1) Encourage private investment in renewable energy resources;

(2) Stimulate the economic growth of this state; ((~~and~~))

(3) Enhance the continued diversification of the energy resources used in this state; and

(4) Promote conservation and efficiency in electricity usage.

Sec. 3. RCW 80.60.010 and 2000 c 158 s 1 are each amended to read as follows:

The definitions in this section apply throughout this chapter unless the context clearly indicates otherwise.

(1) "Alternative energy resources" means the electricity produced from generation facilities fueled by: (a) Wind; (b) solar energy; (c) geothermal energy; (d) landfill gas; (e) wave or tidal action; (f) gas produced during the treatment of wastewater; (g) qualified hydropower; or (h) 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.

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

((~~(2)~~)) (3) "Conservation and efficiency resources" means measures that yield a decrease of energy consumption while providing the same level of energy service.

(4) "Customer-generator" means a user of a net metering system.

((~~(3)~~)) (5) "Department" means the department of community, trade, and economic development.

(6) "Electrical company" means a company owned by investors that meets the definition of RCW 80.04.010.

((~~(4)~~)) (7) "Electric cooperative" means a cooperative or association organized under chapter 23.86 or 24.06 RCW.

((~~(5)~~)) (8) "Electric utility" means any electrical company, public utility district, irrigation district, port district, electric cooperative, or municipal electric utility that is engaged in the business of distributing electricity to retail electric customers in the state.

((~~(6)~~)) (9) "Irrigation district" means an irrigation district under chapter 87.03 RCW.

((~~(7)~~)) (10) "Municipal electric utility" means a city or town that owns or operates an electric utility authorized by chapter 35.92 RCW.

((~~(8)~~)) (11) "Net metering" means measuring the difference between the electricity supplied by an electric utility and the electricity generated by a customer-generator that is fed back to the electric utility over the applicable billing period.

((~~(9)~~)) (12) "Net metering system" means a fuel cell or a facility for the production of electrical energy that:

(a) Uses as its fuel either solar, wind, or hydropower;

(b) Has a generating capacity of not more than twenty-five kilowatts;

(d) Operates in parallel with the electric utility's transmission and distribution facilities; and

(e) Is intended primarily to offset part or all of the customer-generator's requirements for electricity.

((~~(10)~~)) (13) "Port district" means a port district within which an industrial development district has been established as authorized by Title 53 RCW.

((~~(11)~~)) (14) "Public utility district" means a district authorized by chapter 54.04 RCW.

(15) "Qualified diversity resources" means (a) conservation and efficiency resources contracted for after March 1, 2001; or (b) alternative energy resources that are either:

(i) Alternative energy resources initiating operations after March 1, 2001, that are physically metered and that are verified in Washington; or

(ii) Existing alternative energy resources located in Washington and fully owned or contracted by a Washington utility.

(16) "Qualified hydropower" means the additional energy produced by (a) existing hydropower facilities that have been modernized or upgraded after June 1, 1998, to increase capacity or efficiency; or (b) new hydropower facilities that operate with a head of twenty meters or less.

(17) "Small electric utility" means any consumer‑owned utility with twenty-five thousand or fewer electric meters in service, or that has an average of seven or fewer customers per mile of distribution line. "Electric meters in service" means those meters that record in at least nine months in any calendar year not less than two hundred fifty kilowatt hours per month.

NEW SECTION. Sec. 4. (1) By January 1, 2007, and each year thereafter through December 31, 2011, each electric utility shall ensure that at least five percent of its resources used to serve its Washington retail customers are qualified diversity resources. Of the five percent, not less than one and one‑quarter percent must be alternative energy resources and not less than one and one‑quarter percent must be conservation and efficiency resources.

(2) By January 1, 2012, and each year thereafter, each electric utility shall ensure that at least ten percent of its resources used to serve its Washington retail customers are qualified diversity resources. Of the ten percent, not less than two and one‑half percent must be alternative energy resources and not less than two and one‑half percent must be conservation and efficiency resources.

(3) An electric utility that as of March 1, 2001, owns or has under contract sufficient resources to meet one hundred percent of its annual energy needs to serve its customers is exempt from the alternative energy resources obligations of this section until such time as those resources are no longer sufficient to serve at least ninety-five percent of its annual energy needs, or January 1, 2009, whichever is earlier.

(4) If in any year the lowest cost alternative energy resource available to a utility exceeds one hundred ten percent of the capital and energy cost from a new generation facility that is not an alternative energy resource, the utility is relieved of its alternative resource obligations under this section.

(5) A small utility may meet its obligation under this section by investing at least two times the amount of its conservation and renewables discount pursuant to the Bonneville power administration's conservation and renewables discount program for the contract period beginning October 1, 2001.

(6) A utility is relieved of its obligation under this section with regard to alternative energy resources for that portion of its customer load that is met with power purchased from the Bonneville power administration.

NEW SECTION. Sec. 5. (1) By January 1, 2007, and each year thereafter through December 31, 2011, each natural gas distribution utility that provides gas services within two or more counties shall ensure that at least two and one-half percent of its resources used to serve its Washington retail customers are conservation and efficiency resources.

(2) By January 1, 2012, and each year thereafter, each natural gas distribution utility that provides gas services within two or more counties shall ensure that at least five percent of its resources used to serve its Washington retail customers are conservation and efficiency resources.

NEW SECTION. Sec. 6. (1) By March 1, 2003, and by each March 1st thereafter, each electric utility, except electrical companies, shall report at an open public meeting its activities undertaken to achieve the requirements of section 4 of this act. A written copy or transcript of the report must also be submitted to the department within twenty days of the public meeting.

(2) Beginning March 1, 2003, and by each March 1st thereafter, each electrical company and gas company shall report to the commission its activities undertaken to achieve the requirements of sections 4 and 5 of this act.

(3) By July 1, 2003, and each July 1st thereafter, the department and the commission must jointly report to the legislature and the governor whether and how the standards in sections 4 and 5 of this act have been met for the previous calendar year.

NEW SECTION. Sec. 7. A new section is added to chapter 43.21F RCW to read as follows:

(1) The department shall adopt rules governing the reporting requirements in section 6(1) of this act.

(2) The department shall adopt rules establishing criteria for determining whether resources qualify as alternative energy resources or conservation and efficiency resources as defined in RCW 80.60.010. To the extent practicable, these criteria shall be consistent with any pertinent recommendations of the regional technical forum of the Pacific Northwest electric power and conservation planning council created under P.L. 96‑501, 16 U.S.C. Sec. 839. The department may establish procedures by which an electric utility, except an electric company, that makes expenditures for eligible conservation and efficiency resources in an amount equivalent to two percent of its previous calendar year's gross revenues from the bundled sale of electricity to Washington retail customers is deemed to have dedicated one-half of one percent of its resources toward the conservation and efficiency requirements of section 4 of this act. The rules shall include criteria for qualifying expenditures for weatherization of low‑income households as conservation and efficiency resources. The department shall also consider energy savings realized from smart meters and other energy management systems in establishing criteria under this section.

(3) By July 1, 2003, the department shall establish criteria by which utilities may meet the provisions of sections 4 and 5 of this act through a qualified diversity resource credit trading program. For purposes of this section, "qualified diversity resource credit trading program" means a clearinghouse or other system through which a utility may secure, for trade or other consideration, verifiable evidence that a second party has developed a qualified diversity resource equivalent in part or in full to the utility's obligation under this section and that the second party agrees to transfer such evidence exclusively to the credit of the utility. The department shall report to the legislature regarding the establishment of any credit trading program under this section.

NEW SECTION. Sec. 8. A new section is added to chapter 80.28 RCW to read as follows:

The commission shall adopt rules to implement sections 4 through 6 of this act with respect to electrical companies and gas companies. The rules may include criteria to establish equivalence between an electric company's expenditure levels for conservation and efficiency resources and the performance standard percentages set out in sections 4 and 5 of this act.

NEW SECTION. Sec. 9. Each electric utility, as defined in RCW 80.60.010, shall undertake and complete by January 1, 2003, a feasibility study to determine effective methods for reducing by at least three percent use of electricity during daily peak periods of electricity demand. Each utility shall report the results of its study under section 6 of this act. The study shall consider the feasibility and effectiveness of such factors as: Providing consumers information on the cost of electricity at different times of day or season; "smart meters" technology or other energy management systems that enable consumers and utilities to improve management of electricity supply and cost; and rate structures that create an incentive for demand reduction dispatched by utilities.

NEW SECTION. Sec. 10. Any direct service industrial customer that obtains a sales and use tax exemption or deferral or business and occupation tax or public utility tax credit under chapter . . . (House Bill No. 1404, Senate Bill No. 5539, or other similar legislation), Laws of 2001 must meet the obligations under sections 4 and 6 of this act as if it were an electric utility.

NEW SECTION. Sec. 11. A new section is added to chapter 82.08 RCW to read as follows:

The tax levied by RCW 82.08.020 does not apply to sales of smart metering and control technology purchased after July 1, 2003, by an electric utility as defined in RCW 80.60.010, up to a selling price of fifty dollars per utility customer to be served by the technology. "Smart metering and control technology" means equipment, including specialized meters, that provide two‑way electronic communication between the utility and a customer's electric meter or electric appliances, and that will enable the utility to charge different rates during different times of day or to physically reduce or interrupt demand for electricity. The utilities and transportation commission shall provide information to the department and to the electric utility in regard to how many customers are being served by smart metering and control technology on June 30, 2001, and how many additional customers will be served by application of the smart metering and control technology after July 1, 2001.

This section expires June 30, 2007.

NEW SECTION. Sec. 12. A new section is added to chapter 82.12 RCW to read as follows:

The provisions of this chapter do not apply in respect to smart metering and control technology purchased after July 1, 2003, by an electric utility as defined in RCW 80.60.010, up to a selling price of fifty dollars per utility customer to be served by the technology. "Smart metering and control technology" means equipment, including specialized meters, that provide two‑way electronic communication between the utility and a customer's electric meter or electric appliances, and that will enable the utility to charge different rates during different times of day or to physically reduce or interrupt demand for electricity.

This section expires June 30, 2007.

NEW SECTION. Sec. 13. A new section is added to chapter 82.16 RCW to read as follows:

In computing tax under this chapter for any electric utility as defined in RCW 80.60.010 that has been certified by the utilities and transportation commission to have, as of July 1, 2001, installed smart metering and control technology for at least thirty percent of its customers, there may be deducted from the gross income an amount equal to the purchase price of smart metering and control technology purchased in the calendar year, up to one hundred dollars per additional customer enabled to be served by such technology beyond the number of customers that were served by smart metering and control technology in the previous calendar year. "Smart metering and control technology" means equipment, including specialized meters, that provide two‑way electronic communication between the utility and a customer's electric meter or electric appliances, and that will enable the utility to charge different rates during different times of day or to physically reduce or interrupt demand for electricity. The utilities and transportation commission shall provide information to the department and to the electric utility in regard to how many customers are being served by smart metering and control technology on June 30, 2001, and how many additional customers will be served by application of the smart metering and control technology after July 1, 2001.

This section expires June 30, 2003.

NEW SECTION. Sec. 14. Sections 1, 4 through 6, and 10 of this act are each added to chapter 80.60 RCW.

NEW SECTION. Sec. 15. If chapter . . . (House Bill No. 1404, Senate Bill No. 5539, or other similar legislation), Laws of 2001 does not become law by June 30, 2001, section 10 of this act is null and void.

NEW SECTION. Sec. 16. 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.