House Bill 957 has been enthusiastically supported by the Department of Education (DOE), the teachers’ union, parents, contractors, and others too numerous to list here. It calls for allowing up to $46.4 million in Green Energy Market Securitization funds to be loaned to the Department of Education to continue the “cool schools” initiative that began last year with the appropriation of $100 million for energy efficiency and other measures that would be used to lower temperatures in classrooms.
The bill would also appropriate general funds to pay for interest on the loan for the first year.
Gwen Yamamoto Lau, executive director of the Hawai‘i Green Infrastructure Authority (HGIA), testified that her agency strongly supports the measure, “so much so, that it has been working in concert with the DOE, B&F [Budget and Finance] and Hawai‘i Energy and has already submitted a request to the [Public Utilities] Commission to approve EE [energy efficiency] retrofits for the DOE.”
On February 22, the commission authorized HGIA to loan up to $60 million to the DOE for installation of energy efficiency and heat-abatement measures that could reduce the department’s energy consumption and electrical bills.
Yamamoto Lau noted that the DOE’s Ka Hei program, specifying energy efficiency measures for schools, “has identified almost $60.0 million in EE retrofit opportunities.” The HGIA “is not contemplating financing 100 percent” of this, she added, “due to its mandate for 50 percent of the [GEMS] funds to benefit the underserved.” Still, reducing the DOE’s energy consumption by 25 percent, as this measure is intended to do, “could significantly and positively contribute to the achievement of Hawai‘i’s Energy Efficiency Portfolio Standard.”
Public Utilities Commission chairman Randy Iwase took no position on GEMS funds supporting cooler schools. However, he expressed concern that the measure provided a general fund appropriation only for the initial loan repayments. “If funds are not also provided for loan repayments behind this initial period, there could be unintended consequences, including increased surcharges [on ratepayers] and limited ability to achieve the statutorily required energy efficiency portfolio standards,” he said.
Ray Starling, chairman of the Energy Efficiency Working Group of the Hawai‘i Energy Policy Forum, said the forum was unable to reach a consensus on the bill but expressed the group’s similar concern about where the remainder of the loan repayments would come from. “Since GEMS funds come from bonds secured solely by electric utility ratepayers rather than taxpayers, if the proposed loans are not paid by the state beyond the ‘initial’ payment, ratepayers would be on the hook to make up any shortfall. The state should obligate itself to make all repayments on any DOE/B&F loans from the GEMS program,” he stated.
By the time HB 957 made it through the Senate, it had been amended to require the DOE to repay the loan by using funds “saved by the reduced utility costs that result from energy-efficient lighting and other energy efficiency measures.” At the same time, however, the Senate required that the loan be interest-free.
The measure was still in conference committee at press time.
At the HGIA’s April 21 meeting, some members wanted to know if there were any problem with the interest-free provision of HB 957.
Gregg Kinkley, the deputy attorney general assigned to the agency, replied, “The only way for bills like this to have a constitutional infirmity is if they violate the constitution on its face. There may be policy issues involved, but as long as all the changes are consistent and the bond-holders aren’t impaired, and debt service isn’t touched, it’s not unconstitutional. All the rest is policy. In terms of legality, it’s not illegal on its face.”
HGIA chair (and director of the Department of Business, Economic Development, and Tourism) Luis Salaveria said that some analysis had already been done on a loan to the DOE. “Under the original analyses, … it still resulted in $5 million of actual savings to the DOE in ongoing operating costs.”
Yamamoto Lau said that the estimated annual bill savings to the DOE is $8 million. “The estimated principal and interest would have been $4.7 million.”
Salaveria added that, if the DOE is repaying only principal, “the savings could be greater, but at the authority’s expense.”
— Patricia Tummons