HB974 creates a statutory framework for “step-in agreements” tied to certain power purchase agreements between an electric utility and independent power producers. The bill is aimed at supporting the development of clean energy projects by giving project owners and financiers added assurance that they will be paid if the utility fails to make required payments. It does this by requiring the Department of Budget and Finance to enter into step-in agreements for covered contracts, under which the department would step in and make payments from dedicated funds if the utility defaults.
The bill also establishes a Power Purchase Costs Trust Fund outside the state treasury, with separate accounts for power purchase charges and reserve fees. Those revenues would come from on-bill charges approved by the Public Utilities Commission and from a utility-wide nonbypassable surcharge intended to build a reserve account. The fund is designed to be the sole source of payment under the step-in agreements, and the bill repeatedly states that neither the State’s full faith and credit nor other state moneys are pledged to these obligations. It also authorizes the electric utility to act as billing, collection, and payment agent for the department, and sets out how revenues are transferred, held in trust, and used.
In practical terms, the bill would amend chapter 269, Hawaii Revised Statutes, by adding a new part governing definitions, default procedures, trust-fund administration, reserve-fee collection, and the roles of the department, the utility, and the Public Utilities Commission. It would affect investor-owned electric utilities, independent power producers, utility customers, and the Department of Budget and Finance. The bill is structured to protect renewable energy procurement by reducing perceived credit risk for developers and lenders, while limiting state exposure by confining payment obligations to dedicated revenues rather than general state funds.
The general sentiment reflected in the bill text and voting history is supportive of the measure’s clean-energy and reliability goals. The findings section strongly emphasizes affordability, grid reliability, energy security, and the need to keep renewable procurement moving forward despite the utility’s weakened credit position after the 2023 Maui wildfires. The committee votes provided show the bill passing both Senate committees with little opposition, including a unanimous 4-0 vote in one committee and a 4-1 vote in the other, suggesting broad but not complete agreement.
The main points of contention are likely the financial structure and risk allocation. Supporters appear to favor the bill because it helps independent power producers and project financiers feel secure enough to proceed with renewable projects. Potential concerns include the use of utility customer charges and a new surcharge to backstop payment obligations, the creation of a trust fund outside the state treasury, and the extent to which the Public Utilities Commission and the Department of Budget and Finance would be involved in what is essentially a payment guarantee mechanism. The bill tries to address those concerns by limiting liability to dedicated revenues and expressly disclaiming any pledge of general state credit.
HB974 would add a new part to chapter 269, Hawaii Revised Statutes, creating a legal mechanism for state-backed step-in payment support for certain power purchase agreements. It would establish the Power Purchase Costs Trust Fund, authorize reserve fees and on-bill power purchase charges, define default and related terms, and require the Department of Budget and Finance to make payments from the fund if an electric utility defaults on covered agreements. The bill would also give the Public Utilities Commission authority over related rate adjustments and surcharge implementation, and it would designate the utility as the department’s billing and collection agent. The practical effect is to strengthen payment security for independent power producers while limiting the State’s exposure to the dedicated revenues collected under the program.
The overall sentiment appears favorable and policy-driven, with the bill framed as necessary to preserve clean-energy development, maintain reliability, and reduce financing risk for renewable projects. The committee vote history shows strong support, including a unanimous committee passage and another passage with only one dissenting vote. The bill’s findings language is highly supportive of the measure and emphasizes urgency, affordability, and energy transition goals.
The likely areas of disagreement center on whether the bill effectively shifts risk from the utility and project developers to customers through new charges and reserve fees, and whether creating a trust fund and step-in structure is the right policy response to the utility’s credit problems. Critics may also question the complexity of the financing arrangement, the role of the Department of Budget and Finance in a utility payment backstop, and the extent to which the Public Utilities Commission should authorize rate adjustments and surcharges. Supporters, by contrast, appear focused on ensuring that independent power producers can rely on payment and that renewable projects do not stall because of perceived credit risk.