SB1501 creates a new statutory framework for “step-in agreements” tied to certain power purchase agreements for clean energy projects in Hawaii, specifically those arising from the Hawaii investor-owned utility’s Stage 3 request for proposals and first Integrated Grid Planning request for proposals. The bill is aimed at addressing financing and credit-risk concerns that have affected independent power producers after the utility’s sub-investment-grade credit status following the 2023 Maui wildfires. Its stated purpose is to keep renewable projects moving forward by assuring project developers that they will be paid if the utility defaults on its contractual obligations.
Under the bill, the Department of Budget and Finance must enter into step-in agreements with eligible independent power producers after a qualifying power purchase agreement is filed with the Public Utilities Commission and approved through a due diligence review. If the utility defaults, the department would step in and make payments from a newly created Power Purchase Costs Trust Fund, which is established outside the state treasury. The fund would be supported by on-bill power purchase charges and a new reserve-fee surcharge collected from utility customers. The bill also requires the utility to act as billing, collection, and payment agent for the department, and it gives the Public Utilities Commission authority to implement monthly rate adjustments and enforce collection requirements.
The bill’s impact on state law is significant because it adds a new part to chapter 269, Hawaii Revised Statutes, and creates a trust-based payment structure for covered power purchase agreements. It limits the State’s exposure by expressly stating that neither the full faith and credit of the State nor other state funds are pledged; the department’s obligations are capped at money in the trust fund and reserve account. The bill also gives independent power producers a beneficial interest in the collected revenues to the extent they are owed, requires successors to the utility to honor the framework, and provides that the utility’s collection duties continue even through default or insolvency proceedings. In practice, the bill shifts payment security for certain clean energy contracts away from the utility’s credit alone and onto a dedicated customer-funded mechanism.
The general sentiment reflected in the voting history is broadly supportive. The bill advanced through multiple committees with strong margins, including unanimous or near-unanimous votes in later stages, suggesting broad agreement that the measure is needed to support clean energy procurement and utility reliability. The legislative findings emphasize affordability, reliability, renewable energy development, and energy security, which frame the bill as a public-interest response to urgent market and utility-credit conditions.
The main points of contention appear to center on financial risk allocation and customer cost impacts. Although the bill says the State’s general funds are not pledged, it still authorizes a new surcharge and reserve fee that would be paid by utility customers, and it requires rate adjustments designed to ensure sufficient collections. Another likely concern is the unusual role assigned to the Department of Budget and Finance and the utility in managing trust revenues, step-in obligations, and collection duties. The bill also narrows eligibility to specific procurement dockets, which suggests the Legislature was trying to target a particular set of projects rather than create a broad statewide financing tool.
SB1501 amends chapter 269, Hawaii Revised Statutes, by creating a new statutory part governing step-in agreements for certain power purchase agreements. It establishes the Power Purchase Costs Trust Fund outside the state treasury, creates a reserve-fee surcharge, directs the Public Utilities Commission to support collection and rate adjustments, and authorizes the Department of Budget and Finance to assume payment obligations from dedicated revenues if the utility defaults. The bill also changes the legal treatment of collected power purchase revenues by holding them in trust for independent power producers and limiting remedies to specific performance rather than monetary claims against the State.
The bill appears to have been viewed favorably overall, with strong committee support and no recorded opposition in the later conference votes. The legislative findings and committee outcomes suggest a consensus that the measure is needed to preserve clean energy development, improve financing certainty for independent power producers, and protect reliability and affordability as older generating units retire. The tone of the bill is strongly pro-renewable and pro-procurement, with the State positioning itself as a backstop to keep projects moving.
The most notable tensions involve who bears the risk of utility default and how much cost is shifted to customers. Supporters frame the bill as a limited, non-general-fund backstop that protects clean energy procurement, while critics would likely focus on the new customer surcharge, reserve fee, and the possibility that ratepayers will finance a payment-security mechanism for private power contracts. There is also potential concern about the Department of Budget and Finance taking on a quasi-financing role, the utility serving as collection agent even in default or insolvency, and the bill’s narrow focus on specific procurement dockets rather than a broader policy solution.