BILL REQ. #:  S-4644.2 

READ FIRST TIME 02/05/10.   

     AN ACT Relating to modifying the energy independence act; amending RCW 19.285.030, 19.285.040, 19.285.060, 19.285.070, and 19.285.080; and creating a new section.

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

Sec. 1   RCW 19.285.030 and 2009 c 565 s 20 are each 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) "Commission" means the Washington state utilities and transportation commission.
     (4) "Conservation" means any reduction in electric power consumption resulting from increases in the efficiency of energy use, production, or distribution.
     (5) "Cost-effective" has the same meaning as defined in RCW 80.52.030.
     (6) "Council" means the Washington state apprenticeship and training council within the department of labor and industries.
     (7) "Customer" means a person or entity that purchases electricity for ultimate consumption and not for resale.     
     (8) "Department" means the department of commerce or its successor.
     (9) "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.
     (10) "Eligible renewable resource" means:
     (a) Electricity from a generation facility powered by a renewable resource other than fresh water 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)) within the geographic boundary of the western electricity coordinating council or its successor entity; ((or))
     (b) Incremental electricity produced as a result of efficiency improvements completed after March 31, 1999, to hydroelectric generation ((projects)) facilities 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)) an increase in the amount of water storage;
     (c)(i) That portion of incremental electricity produced as a result of equipment efficiency improvements completed after March 31, 1999, attributable to a qualifying utility's share of the electricity output to hydroelectric generation facilities whose energy output is marketed by the Bonneville power administration where the additional generation does not result in new water diversions or an increase in the amount of water storage;
     (ii) That portion of incremental electricity produced as a result of operational efficiency improvements completed after March 31, 1999, attributable to a qualifying utility's share of the electricity output to hydroelectric generation facilities whose energy output is marketed by the Bonneville power administration where the additional generation does not result in new water diversions or an increase in the amount of water storage. However, no qualifying utility may claim such operational efficiencies until appropriate rule making determines how the efficiencies are apportioned among qualifying utilities; or
     (d) Electricity from a biomass energy generation facility located in Washington that commenced operation before March 31, 1999, and that has been significantly modified after the effective date of this section. For the purposes of this subsection, "significantly modified" means an investment to increase a generation facility's energy efficiency that is equal to or greater than fifty percent of the generation facility's net book value. For the purposes of this subsection, "net book value" is calculated as the asset ending balance, as established under generally accepted accounting rules, for the year immediately preceding when the investment is made, plus accumulated depreciation that is accounted for as a negative number.
     (11) "Investor-owned utility" has the same meaning as defined in RCW 19.29A.010.
     (12) "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.
     (13)(a) "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.
     (b) "Nonpower attributes" does not include any aspects, claims, characteristics, or benefits associated with the on-site capture and destruction of methane or other greenhouse gases at a facility through a digester system, landfill gas collection system, or other mechanism, which may be separately marketable as greenhouse gas emissions reduction credits, offsets, or similar tradable commodities.
     (14) "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).
     (15) "Public facility" has the same meaning as defined in RCW 39.35C.010.
     (16) "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.
     (17) "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 fresh water, 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.
     (18) "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; ((and)) or (i) biomass energy ((based on animal waste or solid organic fuels from wood, forest, or field residues, or dedicated energy crops that do not include (i) wood pieces that have been treated with chemical preservatives such as creosote, pentachlorophenol, or copper-chrome-arsenic; (ii) black liquor by-product from paper production; (iii) wood from old growth forests; or (iv) municipal solid waste)).
     (19) "Rule" means rules adopted by an agency or other entity of Washington state government to carry out the intent and purposes of this chapter.
     (20) "Year" means the twelve-month period commencing January 1st and ending December 31st.
     (21)(a) "Biomass energy" means: (i) By-products of pulping and wood manufacturing process; (ii) animal waste; (iii) solid organic fuels from wood; (iv) forest or field residues; (v) wooden demolition or construction debris; (vi) food waste; (vii) liquors derived from algae and other sources; (viii) dedicated energy crops; (ix) biosolids; and (x) 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.
     (22) "Greenhouse gases" has the same meaning as defined in RCW 80.80.010.

Sec. 2   RCW 19.285.040 and 2007 c 1 s 4 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)) By January 1, 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 acquisition 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. A qualifying utility may not use incremental electricity produced as a result of efficiency improvements to hydroelectric generation facilities to meet its biennial conservation acquisition target if the improvements were used to meet its targets under subsection (2)(a) of this section.
     (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)) is designed to have a projected overall thermal conversion efficiency of at least seventy percent. For the purposes of this section, "overall thermal conversion efficiency" means the output of electricity plus usable heat divided by fuel input. 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) Each qualifying utility shall use eligible renewable resources or acquire equivalent renewable energy credits, or a combination of both, to meet the following annual targets:
     (i) At least three percent of its load ((by January 1,)) for the year 2012, and each year thereafter through December 31, 2015;
     (ii) At least ((nine)) ten and twenty-five one-hundredths (10.25%) percent of its load ((by January 1,)) for the year 2016, and each year thereafter through December 31, 2019; and
     (iii) At least ((fifteen)) sixteen and twenty-five one-hundredths (16.25%) percent of its load ((by January 1,)) for the year 2020, and each year thereafter.
     (b) On or before January 1, 2012, and each year thereafter, each qualifying utility shall develop an implementation plan for meeting the renewable energy targets in this subsection for that target year. The implementation plan must include the qualifying utility's average of its load for the two years preceding the target year, projected load for the target year based on the utility's most recent load forecast, an estimate of the quantity of eligible renewable resources and renewable energy credits that the qualifying utility will require to meet the target for the target year, and the amount and type of already owned or contracted eligible renewable resources that may be used to meet the target. A qualifying utility that is an investor-owned utility shall submit the implementation plan to the commission. All other utilities shall submit the implementation plan to their governing boards and to the department, and make the implementation plan available to the auditor. The content of the implementation plan may not be the basis for enforcement actions or penalties against the qualifying utility.
     (c) 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))) (d) 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))) (e) 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))) (f) The requirements of this section may be met for any given year with renewable energy credits ((produced)) generated during ((that)) the target year, the preceding two years, or that may be generated during the first three months of the subsequent year. Each renewable energy credit may be used only once to meet the requirements of this section.
     (((f))) (g) 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))) (h) 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)(i) Except as provided in (j)(i) of this subsection, a qualifying utility that acquires an eligible renewable resource or renewable energy credit may ((count)) apply a multiplier for that acquisition ((at)) of 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))) (j)(i) A qualifying utility that acquires an eligible renewable resource or renewable energy credit may apply a multiplier based on a percentage of apprenticeship labor hours as follows:

Sec. 3   RCW 19.285.060 and 2007 c 1 s 6 are each amended to read as follows:
     (1) Except as provided in subsection (2) of this section, a qualifying utility that fails to comply with the energy conservation or renewable energy targets established in RCW 19.285.040 shall pay an administrative penalty to the state of Washington in the amount of fifty dollars for each megawatt-hour of shortfall. Beginning in 2007, this penalty shall be adjusted annually according to the rate of change of the inflation indicator, gross domestic product-implicit price deflator, as published by the bureau of economic analysis of the United States department of commerce or its successor.
     (2) A qualifying utility that does not meet an annual renewable energy target established in RCW 19.285.040(2) is exempt from the administrative penalty in subsection (1) of this section for that year if the commission for investor-owned utilities or the auditor for all other qualifying utilities determines that the utility complied with RCW 19.285.040(2) (((d) or (i))) (e) or (k) or 19.285.050(1).
     (3) A qualifying utility must notify its retail electric customers in published form within three months of incurring a penalty regarding the size of the penalty and the reason it was incurred.
     (4) The commission shall determine if an investor-owned utility may recover the cost of this administrative penalty in electric rates, and may consider providing positive incentives for an investor-owned utility to exceed the targets established in RCW 19.285.040.
     (5) Administrative penalties collected under this chapter shall be deposited into the energy independence act special account which is hereby created. All receipts from administrative penalties collected under this chapter must be deposited into the account. Expenditures from the account may be used only for the purchase of renewable energy credits or for energy conservation projects at public facilities, local government facilities, community colleges, or state universities. The state shall own and retire any renewable energy credits purchased using moneys from the account. Only the director of general administration or the director's designee may authorize expenditures from the account. The account is subject to allotment procedures under chapter 43.88 RCW, but an appropriation is not required for expenditures.
     (6) For a qualifying utility that is an investor-owned utility, the commission shall determine compliance with the provisions of this chapter and assess penalties for noncompliance as provided in subsection (1) of this section.
     (7) For qualifying utilities that are not investor-owned utilities, the governing board of the utility shall apply the rules adopted by the department under RCW 19.285.080(2) in making its determination of compliance in meeting the targets established in RCW 19.285.040 or alternative compliance under RCW 19.285.040(2) or 19.285.050(1), and rules adopted under this chapter, and may request assistance from the department in doing so.
     (8) For qualifying utilities that are not investor-owned utilities, the auditor is responsible for auditing compliance with this chapter and rules adopted under this chapter that apply to those utilities and the attorney general is responsible for enforcing that compliance.

Sec. 4   RCW 19.285.070 and 2007 c 1 s 7 are each amended to read as follows:
     (1) On or before June 1, 2012, and annually thereafter, each qualifying utility shall report to the department on its progress in the preceding year in meeting the conservation targets established in RCW 19.285.040(1), including expected electricity savings from the biennial conservation target, expenditures on conservation((,)) and actual electricity savings results((,)).
     (2) On or before June 1, 2013, and each year thereafter, each qualifying utility shall submit an annual report to the department. In addition to the material required in subsection (1) of this section, the annual report must contain relevant data demonstrating how the renewable energy targets established in RCW 19.285.040(2) were met, including the utility's annual load for the prior two years, the amount of megawatt-hours needed to meet the annual renewable energy target, the amount of megawatt-hours of each type of eligible renewable resource acquired, the type and amount of renewable energy credits acquired, and the percent of its total annual retail revenue requirement invested in the incremental cost of eligible renewable resources and the cost of renewable energy credits. For each year that a qualifying utility elects to demonstrate alternative compliance under RCW 19.285.040(2) (((d) or (i))) (e) or (k) or 19.285.050(1), it must include in its annual report relevant data to demonstrate that it met the criteria in that section. A qualifying utility may submit its report to the department in conjunction with its annual obligations in chapter 19.29A RCW.
     (((2))) (3) A qualifying utility that is an investor-owned utility shall also report all information required in subsection (1) of this section to the commission, and all other qualifying utilities shall also make all information required in subsection (1) of this section available to the auditor, and on or before June 1, 2013, and annually thereafter, make available to the auditor its determination of compliance in meeting the targets established in RCW 19.285.040. For each year that a qualifying utility determines alternative compliance under RCW 19.285.040(2) (e) or (k) or 19.285.050(1), it must include in its annual report, and make available to the auditor, relevant data to demonstrate that the qualifying utility met the criteria for the applicable section.
     (3) A qualifying utility shall also make reports required in this section available to its customers.

Sec. 5   RCW 19.285.080 and 2007 c 1 s 8 are each amended to read as follows:
     (1) The commission may adopt rules to ensure the proper implementation and enforcement of this chapter as it applies to investor-owned utilities.
     (2) The department shall adopt rules concerning only process, timelines, and documentation to ensure the proper implementation of this chapter as it applies to qualifying utilities that are not investor-owned utilities. Those rules include, but are not limited to, rules associated with a qualifying utility's development of conservation targets under RCW 19.285.040(1); a qualifying utility's decision to pursue alternative compliance in RCW 19.285.040(2) (((d) or (i))) (e) or (k) or 19.285.050(1); and the format and content of reports required in RCW 19.285.070. Nothing in this subsection may be construed to restrict the rate-making authority of the commission or a qualifying utility as otherwise provided by law.
     (3) The commission and department may coordinate in developing rules related to process, timelines, and documentation that are necessary for implementation of this chapter.
     (4) Pursuant to the administrative procedure act, chapter 34.05 RCW, rules needed for the implementation of this chapter must be adopted by December 31, ((2007)) 2011. These rules may be revised as needed to carry out the intent and purposes of this chapter.

NEW SECTION.  Sec. 6   (1) By June 30, 2014, the joint legislative audit and review committee shall conduct a study on the costs and benefits of the renewable and conservation targets under chapter 19.285 RCW, including an examination of how the targets affect the following: The cost of electricity for commercial, industrial, and residential customers of each qualifying utility; and the development of renewable energy.
     (2)(a) The department of commerce shall contract with a mutually acceptable person or entity to study the feasibility of measuring hydroelectric power that is used to integrate an eligible renewable resource and whether classifying such hydroelectric power as an eligible renewable resource will further the purposes of chapter 19.285 RCW. The study must be presented to the appropriate committees of the legislature by December 1, 2013.
     (b) Before selecting the contractor, the department of commerce shall consult the following: Qualifying utilities; large industrial customers; organizations representing environmental interests; and any other directly interested organizations and associations.