House Study Bill 119


                                          HOUSE FILE       
                                          BY  (PROPOSED COMMITTEE ON
                                               NATURAL RESOURCES BILL
                                               BY CHAIRPERSON FREEMAN)


       Passed House, Date                Passed Senate,  Date             
       Vote:  Ayes        Nays           Vote:  Ayes        Nays         
                    Approved                            

                                         A BILL FOR

     1 An Act providing annual purchase or generation requirements for
     2    certain electric utilities from alternate energy production
     3    facilities, requiring establishment of a system of alternate
     4    energy credit trading, making related changes, and providing
     5    an effective date.
     6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
     7 TLSB 1196HC 80
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PAG LIN



  1  1    Section 1.  Section 476.42, Code 2003, is amended by adding
  1  2 the following new subsection:
  1  3    NEW SUBSECTION.  3A.  "Small distributed generation" means
  1  4 a qualifying alternate energy production facility located at
  1  5 or near a user's point of delivery with a capacity of three
  1  6 megawatts or less, and connected at a voltage of less than
  1  7 sixty kilovolts.  To be a qualifying alternate energy
  1  8 production facility, users of distributed generation
  1  9 facilities must maintain ownership of the alternate energy
  1 10 production facility through majority voting membership.  The
  1 11 alternate energy production facility may be connected in
  1 12 parallel operation to the electric utility system.
  1 13    Sec. 2.  Section 476.44, subsection 2, Code 2003, is
  1 14 amended to read as follows:
  1 15    2.  a.  An electric utility subject to this division,
  1 16 except a utility which that elects rate regulation pursuant to
  1 17 section 476.1A, shall not be required to purchase, at any one
  1 18 time, more than its share of one hundred five megawatts of
  1 19 power or generate at least the following percentages of its
  1 20 total annual Iowa retail electric sales from alternative
  1 21 alternate energy production facilities or small hydro
  1 22 facilities at the rates established pursuant to section
  1 23 476.43:.  The board shall allocate the one hundred five
  1 24 megawatts based upon each utility's percentage of the total
  1 25 Iowa retail peak demand, for the year beginning January 1,
  1 26 1990, of all utilities subject to this section.
  1 27    (1)  By December 31, 2004, four percent.
  1 28    (2)  By December 31, 2005, five percent.
  1 29    (3)  By December 31, 2006, six percent.
  1 30    (4)  By December 31, 2007, seven percent.
  1 31    (5)  By December 31, 2008, eight percent.
  1 32    (6)  By December 31, 2009, nine percent.
  1 33    (7)  By December 31, 2010, and annually thereafter, at
  1 34 least ten percent.
  1 35    b.  A maximum of two percent of each utility's total annual
  2  1 retail electric sales may be derived from alternate energy
  2  2 production facilities or small hydro facilities placed in
  2  3 service before January 1, 2004.
  2  4    c.  At least twenty percent of an electric utility's yearly
  2  5 percentage pursuant to the schedule in paragraph "a" shall be
  2  6 derived from small distributed generation facilities.
  2  7    If a utility undergoes reorganization as defined in section
  2  8 476.76, the board shall combine the allocated purchases of
  2  9 power for each utility involved in the reorganization.
  2 10    Notwithstanding the one hundred five megawatt maximum, the
  2 11 board may increase the amount of power that a utility is
  2 12 required to purchase at the rates established pursuant to
  2 13 section 476.43 if the board finds that a utility, including a
  2 14 reorganized utility, exceeds its 1990 Iowa retail peak demand
  2 15 by twenty percent and the additional power the utility is
  2 16 required to purchase will encourage the development of
  2 17 alternate energy production facilities and small hydro
  2 18 facilities.  The increase shall not exceed the utility's
  2 19 increase in peak demand multiplied by the ratio of the
  2 20 utility's share of the one hundred five megawatt maximum to
  2 21 its 1990 Iowa retail peak demand.
  2 22    Sec. 3.  Section 476.44, Code 2003, is amended by adding
  2 23 the following new subsection:
  2 24    NEW SUBSECTION.  3.  The board shall establish and
  2 25 administer a system for trading of alternate energy credits
  2 26 through which a utility shall satisfy its obligation pursuant
  2 27 to subsection 2.
  2 28    a.  Alternate energy credits shall be issued by the board
  2 29 to alternate energy production facilities and small hydro
  2 30 facilities, and shall represent the production of one
  2 31 kilowatt=hour of electrical generation by such facility.
  2 32    b.  Alternate energy credits may be sold or exchanged by
  2 33 the facility to which the credits are issued, or by any other
  2 34 person who acquires the credits.
  2 35    c.  The board shall adopt rules to administer and enforce
  3  1 this subsection that, at a minimum, shall include the
  3  2 following requirements:
  3  3    (1)  An alternate energy credit may be counted only once
  3  4 toward compliance with subsection 2.
  3  5    (2)  The energy generation represented by an alternate
  3  6 energy credit that is used to satisfy subsection 2 may not
  3  7 additionally be used to satisfy obligations to consumers to
  3  8 sell energy produced by alternate energy production
  3  9 facilities.
  3 10    (3)  Each alternate energy credit that is not used in the
  3 11 year of its creation may be banked, and remains valid for the
  3 12 next two compliance years.
  3 13    (4)  A utility otherwise unable to satisfy its obligation
  3 14 under subsection 2 shall purchase credits directly from the
  3 15 board at the cost of three and one=half cents per kilowatt=
  3 16 hour.  The cost shall be adjusted annually for inflation,
  3 17 according to application of the percentage change of the
  3 18 consumer price index for all urban consumers, United States
  3 19 city average, as published in the federal register by the
  3 20 federal department of labor, bureau of labor statistics.  The
  3 21 board may by rule adopt a different adjustment for inflation
  3 22 if it is found to be more appropriate for the pricing of
  3 23 energy credits.
  3 24    Sec. 4.  EFFECTIVE DATE.  This Act, being deemed of
  3 25 immediate importance, takes effect upon enactment.
  3 26                           EXPLANATION
  3 27    This bill provides for a schedule in Code chapter 476 for
  3 28 purchase or generation requirements by certain electric
  3 29 utilities of energy from alternate energy production
  3 30 facilities, more commonly known as a renewable portfolio
  3 31 standard, and related requirements, including a system of
  3 32 energy credit trading.
  3 33    The bill creates a schedule in Code section 476.44 that
  3 34 increases the minimum annual percentage of renewable energy
  3 35 that electric utilities, except for those utilities that have
  4  1 elected rate regulation pursuant to Code section 476.1A, are
  4  2 obligated to purchase from alternate energy production
  4  3 facilities.  As defined in Code section 476.42, an alternate
  4  4 energy production facility means a facility that produces
  4  5 energy from solar, wind turbine, waste management, resource
  4  6 recovery, refuse=derived fuel, agricultural crops or residues,
  4  7 or woodburning sources; the land, building, or improvements at
  4  8 the project site; and the transmission or distribution
  4  9 facilities necessary to conduct the energy produced.  Current
  4 10 Code language requires electric utilities to purchase 105
  4 11 megawatts, which is approximately 2 percent of Iowa retail
  4 12 load.  The bill would shift the requirement to 4 percent of
  4 13 Iowa retail sales by December 31, 2004, and then increase that
  4 14 percentage annually by 1 percent per year, culminating in a 10
  4 15 percent annual purchase or generation requirement by December
  4 16 31, 2010.
  4 17    The bill adds provisions to specify that only 2 percent of
  4 18 each utility's total annual retail sales may be derived from
  4 19 alternate energy production facilities placed into service
  4 20 prior to January 1, 2004, and that at least 20 percent of a
  4 21 utility's yearly purchase or generation requirement must be
  4 22 derived from distributed generation sources.  A new definition
  4 23 is added for "small distributed generation" in Code section
  4 24 476.42 that specifies size, use, and business organization
  4 25 requirements.
  4 26    The board is directed to establish an energy credit trading
  4 27 system in conjunction with these changes.  Credits are issued
  4 28 to alternate energy producers for each kilowatt=hour of
  4 29 electricity produced.  The credits may then be sold or
  4 30 exchanged by those producers.  Buyers may utilize the credits
  4 31 to fulfill purchase or generation obligations under the new
  4 32 provisions of Code section 476.44, or may sell or exchange the
  4 33 credits with another buyer.  An energy credit may only be
  4 34 redeemed once toward fulfillment of the statutory purchase or
  4 35 generation requirement, however.  Energy credits may be banked
  5  1 for up to two compliance years.  A utility unable to satisfy
  5  2 its purchase or generation requirement will be required to
  5  3 purchase credits directly from the board.
  5  4    The bill takes effect upon enactment.
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