STAND. COM. REP. 1151

Honolulu, Hawaii

, 2003

RE: S.B. No. 855

S.D. 1

H.D. 2

 

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Energy and Environmental Protection, to which was referred S.B. No. 855, S.D. 1, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO ENERGY,"

begs leave to report as follows:

The purpose of this bill is to encourage the use of renewable energy systems and reduce the State's reliance on fossil fuel by:

(1) Indefinitely extending the Energy Conservation Income Tax Credit (Tax Credit) provided in section 235-12, Hawaii Revised Statutes (HRS);

(2) Repealing the Tax Credit for heat pumps and ice storage systems; and

(3) Directing the Tax Review Commission to review the renewable energy tax credits provided in section 235-12, HRS, every five years beginning July 1, 2010.

The Department of Business, Economic Development, and Tourism, R & R Services, Inc., Hawaii Solar Energy Association, Inter-Island Solar Supply, Powerlight Solar Electric Systems, Hawaiian Electric Company, Gas Company, Life of the Land, Sierra Club - Hawaii Chapter, Hawaii Renewable Energy Alliance, Energy Efficiency Policy Task Force (Task Force), and a concerned individual supported this measure. The Chamber of Commerce of Hawaii supported the intent of this measure. The Department of Taxation, Tax Foundation of Hawaii, and a concerned individual submitted comments.

The Chair wishes to highlight the informative analysis of Dr. Thomas A. Loudat, Ph.D., an economist who has investigated tax credit issues for the past five years and served as a consultant for the Task Force. Dr. Loudat's analysis concludes that the energy tax credit, unlike many other tax credits, has been fiscally positive for the state. By investing in renewable energy, the energy tax credits allow residents and businesses to invest dollars on local goods and services that would have otherwise gone out of state to buy imported oil. Each dollar that is not spent on imported fuel and is instead spent on goods and services in Hawaii multiplies as it encourages additional spending throughout the economy. This "multiplier effect" results in increased tax revenues for the state. Furthermore, all economic classes benefit from the tax credits. His evaluation of 1999 Department of Taxation data shows that lower-income filers account for a larger percentage of energy credit claims than upper-income filers. The greatest share of tax credits were claimed by middle-income filers.

Dr. Loudat also offered analysis on the potential negative consequences of placing caps on the allowable credit for large renewable systems. There is a risk that caps may stymie development or discourage businesses from investing in these systems, further forestalling the state's goal of achieving energy self-sufficiency. Although Dr. Loudat acknowledged the short term fiscal risk to the state from a multi-million dollar tax credit, he emphasized that over the long term, there is no fiscal risk. In fact, he estimates that the rate of return for the State on a $2.45 million dollar tax credit is approximately eight percent, fifty percent higher than the current rate on thirty-year Treasury bonds. He advised the Committee that by installing a system in a single phase rather than incrementally, a project may take advantage of economy of scales to incur construction cost savings.

Your Committee has amended this bill by:

(1) Inserting provisions for a renewable energy technology tax credit to begin for systems installed after June 30, 2003;

(2) Inserting provisions for energy-efficiency policy review and evaluation; and

(3) Making technical, nonsubstantive amendments for purposes of clarity and style.

As affirmed by the record of votes of the members of your Committee on Energy and Environmental Protection that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 855, S.D. 1, H.D. 1, as amended herein, and recommends that it be referred to the Committee on Finance, in the form attached hereto as S.B. No. 855, S.D. 1, H.D. 2.

 

Respectfully submitted on behalf of the members of the Committee on Energy and Environmental Protection,

 

____________________________

HERMINA M. MORITA, Chair