HOUSE OF REPRESENTATIVES

HOUSE OF REPRESENTATIVES	H.R. NO.	128
TWENTY-FIRST LEGISLATURE, 2002
STATE OF HAWAII

HOUSE RESOLUTION

requesting the public utilities commission to prohibit standby charges and customer retention discount practices with respect to renewable energy or net-metered systems and to consider specific issues in proceedings regarding distributed energy resources.

WHEREAS, Hawaii is extremely dependent on imported oil; and

WHEREAS, Hawaii's dependence on imported oil is detrimental to the State because it:

(1) Decreases the economic stability of Hawaii by subjecting its economy to sudden and sharp spikes in the price of oil; and

(2) Reduces the security of Hawaii's energy economy in the face of natural and human-made disasters or other emergencies;

and

WHEREAS, it is very costly for electric utilities to generate electricity and to meet reserve capacity requirements; and

WHEREAS, other, non-utility means of producing electricity that offer important benefits to Hawaii exist; and

WHEREAS, distributed energy resources (DER) systems and customer self-generation constitute two of these alternatives; and

WHEREAS, DER systems are modular electrical generation or storage facilities located near the point of use and include:

(1) Biomass-based generators;

(2) Combustion turbines;

(3) Concentrating solar power and photovoltaic systems;

(4) Fuel cells;

(5) Wind turbines;

(6) Microturbines;

(7) Engines/generator sets; and

(8) Storage and control technologies;

and can be either connected to the electrical grid or operated independently of the grid; and

WHEREAS, DER systems can use renewable energy, thus providing economic, environmental, and fuel-diversity benefits that would contribute to the further development of indigenous renewable energy; and

WHEREAS, greater use of DER systems and greater customer self-generation can provide electricity with better reliability, at a lower cost, and with greater efficiency than the generation of electricity by utilities; and

WHEREAS, customer self-generation is the production of electricity and, in many cases, useful thermal energy (heat or steam) used for industrial, commercial, heating, or cooling purposes by a metered customer of an electric utility who owns and operates the facility that is:

(1) Located on the customer's premises;

(2) Operated in parallel with the utility's transmission and distribution facilities;

(3) In conformity with the utility's interconnecting requirements; and

(4) Intended primarily to offset all or part of the customer's own electricity needs; and

WHEREAS, certain practices by electric utilities discourage the use of DER systems and customer self-generation, thus jeopardizing Hawaii's ability to reap their benefits; and

WHEREAS, one such practice is standby charges, which are fees that an electric utility charges to a customer who usually obtains electrical power from sources other than the electric utility for the right to use the utility's electricity when the customer's non-utility power source is unavailable; and

WHEREAS, another such practice is customer retention discounts, which are discounts that an electric utility offers a major commercial or industrial customer if the customer does not install on-site generation facilities that would reduce the electrical load on the utility's system; and

WHEREAS, an appropriate balance must be struck between the Legislature's desire to encourage DER systems and the need for equitable rates under a variety of arrangements between DER owners and electric utilities; now, therefore,

BE IT RESOLVED by the House of Representatives of the Twenty-first Legislature of the State of Hawaii, Regular Session of 2002, that the Public Utilities Commission (PUC) is requested to:

(1) Prohibit the standby charge and customer retention discount practices of electric utilities with respect to:

(A) Net-metered systems, which are systems that measure the difference between the electricity supplied by the utility through the electrical grid and the electricity generated by an eligible customer and fed back to the grid over a specific period of time; and

(B) Renewable energy systems, which are systems that produce electrical energy by:

(i) Wind;

(ii) Solar energy;

(iii) Hydropower;

(iv) Landfill gas;

(v) Waste-to-energy resources;

(vi) Geothermal power;

(vii) Ocean thermal energy conversion;

(viii) Wave energy;

(ix) Biomass, including municipal solid waste;

(x) Biofuels or fuels derived entirely from organic sources;

(xi) Hydrogen fuels; and

(xii) Fuel cells where the fuel is derived entirely from renewable sources; and

(2) With respect to fossil-fueled on-site generation facilities and standby charges, consider establishing rate-making design and rate-making policies (Policies) that:

(A) Provide for fair cost allocation among customers;

(B) Allow the utility adequate cost recovery while maintaining costs to customers;

(D) Send proper price signals to prospective purchasers of distributed generation;

(3) Consider the following elements (Elements), to ensure compliance with the Policies, when considering standby charges in any proceeding:

(A) Ensure that standby charges are cost-based;

(B) Provide for equitable treatment of cost recovery for distribution service where customers provide for physical assurance, which is the application of devices and equipment that interrupts a distributed-generation customer's normal load when distributed generation does not operate;

(i) Supplemental power, which is power supplied by the utility to a customer whose on-site source of generation does not regularly supply all the power necessary at its premises;

(ii) Backup service, which is service supplied by the utility in lieu of generation normally provided by the customer's on-site generation facilities during periods of unscheduled outages; and

(iii) Maintenance service, which is service scheduled by the customer with the utility to replace on-site generation facilities when the customer's generating facilities are scheduled to be out of service; and

(D) Continue supplemental power according to the customer's otherwise applicable tariff;

(E) Reflect reduced costs for providing services such as backup and maintenance service for customer-installed DER systems compared to supplemental service;

(F) Recognize cost differences between supplemental power and backup power needs by considering the value of diversification in standby reservation charges, since diversity reduces transmission and distribution infrastructure requirements;

(G) Allocate a greater share of cost to backup service than maintenance service because it is an on-demand service and has distribution infrastructure requirements associated with it;

(H) Recover public purpose costs from standby customers through a cost per kilowatt usage charge;

(I) Charge on the basis of embedded, not incremental, costs of service to be consistent with the manner in which rates are calculated for other distribution services;

(J) Factor benefits when DER systems reduce peak demand for electricity when the costs of the utility delivering power are at their highest;

(K) Exempt DER systems using renewable energy resources from standby charges or customer retention discounts because of the economic, environmental, and fuel-diversity benefits of renewable resources; and

(L) Consider whether customer retention discounts have been used to discourage customers from installing DER systems and how this practice is consistent with the Policies;

and

BE IT FURTHER RESOLVED that if the PUC does not consider any or all of the Elements, it shall provide a report to the Legislature explaining its actions and demonstrating how its decision is in the public interest. The PUC shall provide the report no later than 20 days following any decision and order issued. At the latest, the PUC shall provide the report no later than 20 days prior to the convening of the 2003 regular session of the Legislature; and

BE IT FURTHER RESOLVED that a certified copy of this Resolution be transmitted to the Chairperson of the PUC.

	OFFERED BY:	_____________________________

Report Title:

Standby charges and customer retention discounts.