Lawmakers, for the second year in a row, have come up short in their effort to tackle the problem of upfront costs that are keeping many Hawaii residents from buying solar water heaters and other energy-efficient appliances.

This year’s attempt (SB 182) would have set up a financing mechanism allowing homeowners and renters to buy the devices and pay for them over time using the savings on their electricity bill. The bill directed the Public Utilities Commission to oversee an "on-bill" financing program, which would have been backed by a fund normally used to pay for consumer rebates on compact fluorescent bulbs and other energy-saving measures.

Environmental groups, the solar energy industry and the state office of the Consumer Advocate lined up in support of the bill, saying it would remove a major impediment in achieving the goals of the state’s clean energy campaign.

However, officials from the PUC and Hawaiian Electric Co. told lawmakers they were concerned the program would be expensive and difficult to administer.

After a joint hearing by the Energy and Environment Committee and the Commerce and Consumer Protection committees, the bill was amended to kill the on-bill financing mechanism and replace it with a cost-benefit analysis of the program. The bill was sent to the Ways and Means Committee but was not moved out of that committee.

Energy and Environment Committee Chairman Mike Gabbard (D, Kalaeloa-Makakilo) said it was "frustrating" to have the bill stall, particularly because on-bill financing has been successfully implemented in other states.

The Legislature attempted last session to address the issue of upfront costs for solar panels with a bill to create a financing system funded by state bonds. Homeowners would essentially borrow from the fund and pay off the loan with a special property tax assessment.

However, lawmakers pulled the plug on the bill after Fannie Mae and Freddie Mac said they were concerned that taxpayers would be at risk if a homeowner using the creative financing defaulted on his or her mortgage. Fannie and Freddie are government-sponsored enterprises that guarantee more than half of the residential mortgages in the country. The mortgage companies said their ability to recover collateral in the event of a default would be compromised by the fact that property taxes must be paid first from any proceeds on a foreclosed home.

Nonetheless, a host of other energy-related bills are progressing (see chart below).

Energy-related legislation pending before the state Senate

SB 722

Takes the share of the so-called barrel tax currently going into the general fund and redirects it to two special funds devoted to energy security and food security. When lawmakers approved the barrel tax last year — raising the tax on petroleum products to $1.05 from 5 cents — they specified that 60 cents of the increase would go into the general fund to help balance the budget. By taking the revenue going into the general fund and using it to promote energy self-sufficiency and agricultural sustainability, the bill restores the "original intention" of the legislation, according to a committee report on the bill.

SB 631

Allows solar farms to be built on all classifications of agricultural land except for acreage with an "A" rating — the most productive land — and parcels that have been designated "important agricultural lands." The bill also specifies that solar farms on lower-rated "B" and "C" lands cannot occupy more than 10 percent of the parcel’s acreage. There would be no limit on the size of solar farms on land with "D" and "E" ratings, the lowest two categories. The state already allows wind farms on all categories of agricultural land under the reasoning that, unlike solar panels, wind turbines have a small footprint that does not preclude high-productivity land from being farmed.

SB 199

Ensures that electric utility customers with photovoltaic power generation systems would be able to continue "net energy metering" agreements with their utility in the event the Public Utilities Commission establishes alternative programs to compensate those customers for the surplus energy they feed back into the grid. Under state law all utility customers who operate renewable energy generation systems up to 100 kilowatts are allowed to export surplus electricity into the grid and receive credits at full retail value that can be used to offset electricity purchases for the following 12 months. There was concern in the solar power industry that new "feed-in tariff" rules approved by the PUC last fall for selling renewable energy back to the utility could be used to cancel NEM contracts.

SB 704

Clarifies that third-party companies that own and operate solar energy systems installed on customers’ homes are not considered public utilities. The bill is intended to encourage the growth of companies like SunRun Inc. that recently expanded to Hawaii with a business model in which it installs photovoltaic systems with no upfront cost and sells the electricity back to the homeowner or business at a fixed rate over 20 years. Industry players said they were concerned that companies like SunRun would be discouraged from doing business in Hawaii if they had to deal with regulatory framework imposed on a public utility.

SB 1482

Requires the Public Utilities Commission to weigh the benefits of capital spending by utilities on renewable energy and efficiency projects against the short-term expense. The bill also requires the PUC to consider the need to reduce the state’s reliance on fossil fuels when it rules on proposals. The tension between efforts to adopt more renewable energy and the higher costs to ratepayers is something the PUC has already dealt with in recent power purchase agreements it has approved between Hawaiian Electric Co. and commercial providers such as wind and solar farms. The bill formalizes that policy in state law.

SB 99

Restructures the Public Utilities Commission, including increasing the number of commissioners to five from three and adding staff to give the panel the resources needed to keep pace with the growing complexity of issues related to energy policy. The bill also creates an executive officer and creates specialized subject matter panels within the PUC. The three commissioners currently are responsible for overseeing regulation of a wide range of businesses from sewer companies to telecommunications firms. The office of the state auditor has conducted numerous management audits of the PUC over the past 36 years and "has consistently found serious and pervasive problems with staffing, management and planning," according to a committee report on the bill.