SB3326 SD2

SECTION 1. (a) The public utilities commission shall conduct a study on the desirability of the separation of ownership and control of electric energy generation services in Hawaii from transmission and distribution services.

(b) The study, at a minimum, shall review and examine how the separation of ownership and control of electric generation services from transmission and distribution services could:

(1) Affect the existing labor workforce employed in these services;

(2) Create positive or negative impacts for the neighbor islands;

(3) Create savings for ratepayers;

(4) Ensure customer rate stability;

(5) Impact system reliability on each affected island grid;

(6) Align with the State’s climate and environmental goals; and

(7) Affect market concentration and competitiveness in the Hawaii energy generation sector.

(c) The public utilities commission shall submit an initial report on any preliminary findings or conclusions from this study no later than twenty days prior to the convening of the regular session of 2027.

(d) The public utilities commission shall submit its final report on the study required by this Act and any proposed legislation no later than twenty days prior to the convening of the regular session of 2028.

SECTION 2. Chapter 269, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§269- Separation of electric generation services from transmission and distribution services; requirements. (a) Following the completion and submission to the legislature of a final report studying the desirability of the separation of ownership and control of electric energy generation services in Hawaii from transmission and distribution services, the public utilities commission may adopt rules to require separate ownership and control of electric generation services from transmission and distribution services in the State, in furtherance of and pursuant to this chapter.

(b) The commission may establish and implement a restructured electric industry in which electric generation services are open to competition and are provided by entities that are not under common ownership or control, directly or indirectly, with the electric utility, its parent holding company, or any affiliated entity, and that do not have any direct or indirect ownership interest, management role, governance rights, or material financial interest in electric generation services within the electric utility or its affiliated entities, while transmission and distribution service to end-use consumers shall continue to be provided by the electric utility as regulated monopoly services.

(1) Ensure nondiscriminatory access to transmission and distribution facilities on just and reasonable terms for all providers of electric generation services, consistent with electric system reliability and public safety;

(2) Require and enforce accounting, operational, and code of conduct requirements sufficient to promote transparency and prevent cross-subsidization, undue preference, or discrimination between transmission and distribution operations and any generation-related interests;

(3) Ensure preservation of electric system reliability, continuity of service, and universal service obligations during and after any implementation of the separation of ownership and control authorized by this section;

(4) Ensure the provision of the fair and reasonable recovery, through lawful regulatory mechanisms, of prudently incurred costs associated with existing electric generation assets, including but not limited to stranded assets that may result from the separation authorized by this section, consistent with the public interest and protection of ratepayers;

(5) Preserve all existing statutory programs and protections for customers, including consumer protection, energy efficiency, renewable energy, demand response, customer self-generation, and distributed energy resource programs, unless expressly modified by the legislature;

(6) Require phased or staged implementation of the separation of ownership and control authorized by this section, including sequencing or transitional steps as appropriate to maintain electric system reliability, continuity of service, and public safety;

(7) Provide for interim arrangements, as appropriate, governing the provision of electric generation, transmission, and distribution services during any transition period, including consideration of existing contracts and obligations, to reduce financial and operational risk and to support system stability during implementation;

(8) Protect and support workforce stability and continuity of skilled labor necessary to maintain electric system reliability, public safety, and continuity of service during and after the transition, including the protection of existing labor and collective bargaining agreements;

(9) Require improvements in transmission and distribution investment, including grid hardening, wildfire mitigation, outage prevention, faster restoration, and expanded interconnection capacity for utility-scale and distributed renewable generation;

(10) Ensure coordination between the electric utility and providers of electric generation services during any transition period to support operational continuity, resource adequacy, and electric system reliability;

(11) Provide for transparency and meaningful stakeholder participation in the rulemaking and implementation process, consistent with chapter 91;

(12) Require the separation of ownership and control of electric generation assets and generation procurement functions from transmission and distribution operations, including provisions governing the disposition or transfer of existing generation assets and contracts, consistent with electric system reliability, the public interest, and the protection of ratepayers;

(13) Address the treatment of existing and future power purchase agreements with independent power producers; provided that the rules shall preserve and not impair existing contractual rights, lender protections, and step-in agreements established under state law, including protections established pursuant to part XI of this chapter; provided further that any rules adopted pursuant to chapter 91 shall ensure that, following any implementation of the separation of ownership and control authorized by this section, the electric utility providing transmission and distribution service is not the long-term contracting party for electric generation, except as necessary on a transitional basis or to support default service, electric system reliability, or resource adequacy; provided further that the rules shall not require the renegotiation or modification of existing power purchase agreements, except by mutual agreement of the parties; provided further that the rules may provide for the assignment, novation, or other lawful transfer of existing power purchase agreements, or alternative contractual arrangements, in a manner that preserves existing financing structures, credit support arrangements, and electric system reliability, and minimizes financial risk to ratepayers; and

(14) In adopting rules pursuant to chapter 91, consider at a minimum, the impacts of the authorized separation on electric system reliability, resource adequacy, affordability for ratepayers, transition costs, workforce stability, wildfire and public safety risk, and the need for coordinated system planning during and after implementation.

(d) The public utilities commission may establish milestones or benchmarks, as appropriate, to measure progress toward any implementation of the separation of ownership and control authorized by this section.

(e) This section shall not apply to an electric utility organized and operating as an electric cooperative."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect on July 1, 2026.

THE SENATE	S.B. NO.	3326
THIRTY-THIRD LEGISLATURE, 2026		S.D. 2
STATE OF HAWAII