Energy Efficiency. Energy efficiency is the use of less energy to perform the same task or produce the same result. Energy-efficient homes and buildings use less energy to heat, cool, and run appliances and electronics. According the U.S. Department of Energy, energy efficiency saves money, increases the resilience and reliability of the electric grid, and provides additional environmental benefits. The federal government and Washington State offer weatherization programs, which the Department of Commerce (Commerce) runs for qualified low-income households.

Energy Independence Act.  Approved by voters in 2006, the Energy Independence Act (EIA), also known as Initiative 937, requires qualifying electric utilities to meet targets for energy conservation and for using eligible renewable resources.  Qualifying utilities are electric utilities with 25,000 or more customers in the state, and there are 18 utilities subject to the EIA.
 
Qualifying utilities must pursue all conservation that is cost-effective, reliable, and feasible.  They need to identify the conservation potential over a ten-year period, and set two-year targets.

Public Utility Tax.  The public utility tax (PUT) is imposed on gross income derived from the operation of public and privately owned utilities, including businesses that engage in transportation, communications, and the supply of energy, natural gas, and water.  The tax is in lieu of the business and occupation tax.  This tax applies only on sales to consumers.  There are also varying rates of the PUT, depending on the specific utility activity.

Business and Occupation Tax. Washington's major business tax is the business and occupation (B&O) tax.  The B&O tax is imposed on the gross receipts of business activities conducted within the state, without any deduction for the costs of doing business.  There are several rate categories, and a business may be subject to more than one B&O tax rate, depending on the types of activities conducted.  

The bill as referred to committee not considered.

Residential Energy Efficiency Capitalization Grant Program. Subject to availability of amounts appropriated for this specific purpose, the Residential Energy Efficiency Capitalization Grant Program (Grant Program) is created within Commerce. The purpose of the Grant Program is to enable consumer-owned utilities (COUs) to provide residential loan options that create energy efficiency opportunities for eligible households. Energy efficiency includes audits, upgrades, and retrofits needed to achieve energy savings and improve the comfort of buildings.
 
An eligible household means a single person, family, or unrelated persons living together whose income is defined by Commerce, provided the income does not exceed 80 percent of area median household income or 200 percent of the federal poverty level, adjusted for household size. Commerce must adopt rules to implement the Grant Program.

Energy Efficiency Revolving Loan Programs. Each COU may apply to Commerce to receive funding to establish its own Energy Efficiency Revolving Loan Program (program). A COU may choose to contract with a third party to implement the program. All programs must include the following elements:

• priority given to properties in overburdened communities, with additional consideration for regions of the state that experience disproportionately high levels of air contaminants and pollutants related to wildfire smoke; 
• determination of income qualification must comply with guidelines adopted by rule;
• all loans must be interest free;
• loans must be secured with a lien on the property that receives the energy efficiency improvement;
• a robust consumer protection plan, including information about choosing a program that meets a customer's budget; 
• a list of participating contractors must be identified and provided as part of the application process;
• a separate billing system or on-bill repayment program must be provided for participating customers; 
• a plan for informing and education residential customers about the program; and 
• an energy efficiency revolving loan account, which must receive all loan repayment moneys.  

Depending on customer needs and circumstances, a COU may offer different loan programs, including: 

• deferred loans for income-qualified customers that own and occupy their home?the program must cover the full cost of the project; allow loan payment to be deferred until the home is sold and the loan balance is paid as part of the sales transaction; and allow customers to qualify based on payment history with the COU; and    
• forgivable loans for property owners with income-qualified tenants?the program must require an energy audit of the property; the property to be continuously occupied by income-qualified tenants for five years after the upgrades; and the property owner to keep the rent within the fair market rent during the five-year time period. If the property owner fails to meet the requirements, the loan balance is transferred to a new loan and becomes due when the home is sold.  

COUs may retain up to 5 percent of the funds received from Commerce for administrative costs for the program. 

At least annually, any COU that receives Grant Program funding must report to Commerce their program costs, and the number of customers who received program loans. Beginning, October 1, 2025, Commerce must annually submit a brief report to the appropriate committees of the Legislature, including the information submitted by the COUs, the number of program applicants, the total amount of funding loaned to COUs, and the median loan award provided to participating customers. 
 
A COU may claim conservation savings from cost-effective measures financed through a program to apply toward EIA conservation targets. Loan program repayments are not subject to the PUT or the B &O Tax. The tax preference performance statement provisions do not apply to this bill.

The program expires January 1, 2034.  

• Allows consumer-owned utilities to retain up to 5 percent of the funds received from Commerce for administrative costs for the program. 
• Directs Commerce to provide a brief annual report to the Legislature with specific program criteria, beginning October 1, 2025. 
• Expires the program January 1, 2034. 
• Exempts funds for the program from the B&O Tax. 
• Exempts the public utility tax and B&O tax exemptions from the requirements of a tax preference performance statement and Joint Legislative Audit and Review Committee study.  

PRO: This is a great step to help access capital. Federal money could be looked into to capitalize. Focus on the donut hole that doesn?t qualify for low-income weatherization programs. Small business and nonprofits could be included. Add consumer protection language. Fuel neutral investments do not matter if it is an electric or natural gas customer.  

OTHER:  Natural gas customers should be allowed to participate in the program as well. Our biggest concerns are the lien priority and how to collect at the point of sale. We agree weatherization and conservation is important. 

PRO: Senator Liz Lovelett, Prime Sponsor; Amy Wheeless, NW Energy Coalition.

OTHER: Casey Brown, NW Natural and Cascade Natural Gas; Matt Miller, Puget Sound Energy.

The committee recommended a different version of the bill than what was heard. PRO: This bill opens the literal and figurative door for allowing households to reduce energy bills and reduces greenhouse gas emissions and energy consumption in the state. We know that energy efficiency loan programs can provide necessary financing options for low- and moderate-income customers who might not otherwise afford or pursue these critical investments. Tacoma Power has operated such a program since 1995, provided over $2 million in no interest and forgivable loans, managed own customer service and billing, with a default rate of less than 1/3 of 1 percent. This bill provides more opportunities for COUs across the state to help customers achieve increasingly necessary energy efficiency investments. 

OTHER: This is a valuable, optional tool. Small public utility districts don't have experience regarding the authority to place a lien. Perhaps there could be a carve out for funds to be used for administrative costs.