BILL REQ. #:  H-0606.1 

Read first time 01/16/13.   Referred to Committee on Environment.

     AN ACT Relating to modifying the renewable energy cost recovery program; amending RCW 82.16.110, 82.16.120, and 82.16.130; and adding new sections to chapter 82.16 RCW.

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

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

Sec. 2   RCW 82.16.120 and 2011 c 179 s 3 are each amended to read as follows:
     (1)(a) Until July 1, 2014, 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).
     (3)(a) By August 1st of each year application for the incentive must be made to the light and power business serving the situs of the system by certification in a form and manner prescribed by the department that includes, but is not limited to, the following information:
     (i) The name and address of the applicant and location of the renewable energy system.
     (A) If the applicant is an administrator of a community solar project as defined in RCW 82.16.110(2)(a)(i), the application must also include the name and address of each of the owners of the community solar project.
     (B) If the applicant is a company that owns a community solar project as defined in RCW 82.16.110(2)(a)(iii), the application must also include the name and address of each member of the company;
     (ii) The applicant's tax registration number;
     (iii) The date of the notification from the department of revenue stating that the renewable energy system is eligible for the incentives under this section; and
     (iv) A statement of the amount of kilowatt-hours generated by the renewable energy system in the prior fiscal year.
     (b) Within sixty days of receipt of the incentive certification the light and power business serving the situs of the system must notify the applicant in writing whether the incentive payment will be authorized or denied. The business may consult with the climate and rural energy development center to determine eligibility for the incentive payment. Incentive certifications and the information contained therein are subject to disclosure under RCW 82.32.330(3)(l).
     (c)(i) Persons, administrators of community solar projects, and companies receiving incentive payments must keep and preserve, for a period of five years, suitable records as may be necessary to determine the amount of incentive applied for and received. Such records must be open for examination at any time upon notice by the light and power business that made the payment or by the department. If upon examination of any records or from other information obtained by the business or department it appears that an incentive has been paid in an amount that exceeds the correct amount of incentive payable, the business may assess against the person for the amount found to have been paid in excess of the correct amount of incentive payable and must add thereto interest on the amount. Interest is assessed in the manner that the department assesses interest upon delinquent tax under RCW 82.32.050.
     (ii) If it appears that the amount of incentive paid is less than the correct amount of incentive payable the business may authorize additional payment.
     (4) Except for community solar projects, 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, 2014, except that any entity receiving incentive payments under this section on the effective date of this section may continue to receive payments until July 1, 2020.

NEW SECTION.  Sec. 3   A new section is added to chapter 82.16 RCW to read as follows:
     (1) A renewable energy system cost recovery incentive program is created to be administered by the department of commerce. Utility participation in the program is voluntary.
     (2)(a) Beginning July 1, 2014, the following may apply for cost recovery incentives under this section: Any person, other than a utility or a gas distribution business, who owns a customer-generated electricity renewable energy system; or a participant in a community solar project as defined in RCW 82.16.110(2)(a). A person must first apply to the department of commerce for certification that a customer-generated electricity renewable energy system is eligible to receive an incentive. The certification application may be 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;
     (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) When determining if eligible equipment is manufactured in Washington state, the department of commerce must rely on the opinion of the Washington State University energy extension program.
     (c) Within thirty days of receipt of the application the department of commerce must notify the applicant by mail, or electronically as provided in RCW 82.32.135, whether the renewable energy system is certified for an incentive under this section. System certifications and the information contained therein are subject to disclosure under RCW 82.32.330(3)(l).
     (3)(a) After a customer-generated electricity renewable energy system is certified by the department of commerce, an annual application for the incentive under this section must be made to the participating utility serving the situs of the system by 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;
     (ii) The applicant's tax registration number;
     (iii) The date of the notification from the department of commerce stating that the renewable energy system is eligible for the incentives under this section; and
     (iv) A statement of the amount of kilowatt-hours generated by the renewable energy system in the prior fiscal year.
     (b) Within sixty days of receipt of the incentive application the utility serving the situs of the system must notify the applicant in writing whether the application is accepted. A participating utility must pay the successful applicant incentive payments as calculated under subsection (4) of this section.
     (c)(i) Persons 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 utility that made the payment or by the department of revenue. If upon examination of any records or from other information obtained by the utility or department it appears that an incentive has been paid in an amount that exceeds the correct amount of incentive payable, the utility 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 of revenue 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 utility may authorize additional payment.
     (4) Except for utility-owned community solar projects as defined in RCW 82.16.110(2)(a)(ii), the incentive is fifteen cents per kilowatt-hour generated unless requests exceed the amount authorized for credit to the participating utility. For utility-owned community solar projects, the incentive is thirty cents per kilowatt-hour generated unless requests exceed the amount authorized for credit to the participating utility. For the purposes of this section, the rate paid for the incentive must 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) Except as provided in (b) of this subsection (5), no person is eligible for incentives provided under this section for more than five thousand dollars per year.
     (b) In the case of a utility-owned community solar project as defined in RCW 82.16.110(2)(a)(ii), 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) The Washington State University energy extension program must establish guidelines for technologies that are identified as Washington manufactured. The university must use the guidelines when advising the department of commerce.
     (7)(a) Except as provided in (b) of this subsection (7), the environmental attributes of the renewable energy system belong to the applicant, and do not transfer to the state or the utility upon receipt of the incentive.
     (b) In the case of a utility-owned community solar project as defined in RCW 82.16.110(2)(a)(ii), the environmental attributes of the renewable energy system belong to the utility.
     (8) Utilities participating in the renewable energy system cost recovery program must offer ten-year contracts for the payment of incentives. The remainder of a contract may be transferrable to a new owner of the situs of the renewable energy system.
     (9) Utilities participating in the renewable energy system cost recovery program may charge applicants an administrative fee.
     (10) No incentive may be paid under this section for kilowatt-hours generated before July 1, 2014, or after June 30, 2024, except that a person receiving payments under a ten-year contract may receive payments until July 1, 2031, or until the end of the contract, whichever is sooner.
     (11) The following definitions apply throughout this section unless the context clearly requires otherwise.
     (a) "Customer-generated electricity" means the alternating current electricity that is generated from a renewable energy system or utility-owned community solar energy system located in Washington state and installed on a residence, a business, or real property owned by a local government or federally recognized Indian tribal government that is also provided electricity by a utility. Except for utility-owned community solar projects, a system located on a leasehold interest does not qualify under this definition.
     (b) "Person" means an individual, business, federally recognized Indian tribe, local government entity, or a participant in a community solar project as defined in RCW 82.16.110(2)(a).
     (c) "Utility" means a light and power business as defined in RCW 82.16.010.

Sec. 4   RCW 82.16.130 and 2010 c 202 s 3 are each amended to read as follows:
     (1) A light and power business ((shall)) 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 RCW 82.16.120. The credit ((shall)) must be taken in a form and manner as required by the department. The credit under this section for the fiscal year may not exceed one-half percent of the businesses' taxable power sales due under RCW 82.16.020(1)(b) or one hundred thousand dollars, whichever is greater. Incentive payments to participants in a utility-owned community solar project as defined in RCW 82.16.110(2)(a)(ii) may only account for up to twenty-five percent of the total allowable credit. Incentive payments to participants in a company-owned community solar project as defined in RCW 82.16.110(2)(a)(iii) may only account for up to five percent of the total allowable credit. The credit may not exceed the tax that would otherwise be due under this chapter. Refunds ((shall)) 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.
     (2) For any business that has claimed credit for amounts that exceed the correct amount of the incentive payable under RCW 82.16.120, the amount of tax against which credit was claimed for the excess payments ((shall be)) are immediately due and payable. The department ((shall)) must assess interest but not penalties on the taxes against which the credit was claimed. Interest ((shall)) must be assessed at the rate provided for delinquent excise taxes under chapter 82.32 RCW, retroactively to the date the credit was claimed, and ((shall)) accrues until the taxes against which the credit was claimed are repaid.
     (3) The right to earn tax credits under this section expires ((June 30, 2020. Credits may not be claimed after June 30, 2021)) July 1, 2014.

NEW SECTION.  Sec. 5   A new section is added to chapter 82.16 RCW to read as follows:
     (1) Beginning July 1, 2014, a utility is allowed a credit against taxes due under this chapter in an amount equal to cost recovery incentive payments made in any fiscal year under section 3 of this act. The credit must be taken in a form and manner as required by the department of revenue. The credit under this section for the fiscal year may not exceed one-half percent of the utility's taxable power sales due under RCW 82.16.020(1)(b) or one hundred thousand dollars, whichever is greater. Incentive payments to participants in a utility-owned community solar project as defined in RCW 82.16.110(2)(a)(ii) may only account for up to twenty-five percent of the total allowable credit. Incentive payments to participants in a company-owned community solar project as defined in RCW 82.16.110(2)(a)(iii) may only account for up to five percent of the total allowable credit. The credit may not exceed the tax that would otherwise be due under this chapter. 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.
     (2) For any utility that has claimed credit for amounts that exceed the correct amount of the incentive payable under RCW 82.16.120, the amount of tax against which credit was claimed for the excess payments is immediately due and payable. The department of revenue must assess interest but not 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 credit was claimed, and accrues until the taxes against which the credit was claimed are repaid.
     (3) The right to earn tax credits under this section expires July 1, 2030. Credits may not be claimed after June 30, 2031.
     (4) For the purpose of this section, "utility" means a light and power business as defined in RCW 82.16.010.