Committees back PPA ‘step‑in’ language to support renewable project financing with safeguards

The Hawaii Senate on Thursday advanced HB 974 HD1, a measure to provide a state-level backstop for payments under power purchase agreements (PPAs) with independent power producers (IPPs). Supporters said the step-in mechanism is necessary to secure low-cost financing for renewable-energy projects while opponents and budget officials urged safeguards to avoid exposing the State to open-ended liability.

Hawaiian Electric, Clearway Energy and developers argued that uncertainty over the utility’s credit rating and financial condition is increasing financing costs and could delay or cancel planned renewable projects. “HB 974 HD1 is crucial for Hawaiian Electric’s customers and development of new renewable energy projects,” Colton Ching testified for the utility, saying the measure would help avoid higher power-purchase costs driven by higher financing spreads.

Witnesses including Clearway and AES urged retaining “shall” language for prompt action by the state under narrowly defined conditions; the PUC and Budget & Finance raised concerns and asked for guardrails. Blue Planet Foundation and other clean-energy groups urged inclusion of community-based renewable energy projects so smaller community aggregators receive the same protections as larger IPPs.

Committee leaders proposed and read a package of amendments that (a) require Budget & Finance to execute step-in agreements after due diligence, (b) narrow and clarify the state’s role as a pass-through to ensure payments to IPPs are prioritized from collected revenues, (c) preserve developer protections to ensure PPAs remain entitled to payment even when collections are late, (d) add reporting and replenishment language for the reserve fee, and (e) exempt certain department contracts from procurement statutes as technical clarifications. The draft also included AG-suggested language to limit state liability and several PUC-proposed clarifications. The committee accepted most of those edits while declining a few proposed changes that would have weakened the state’s obligation or broadened exemptions.

Senators debated liability and procurement questions at length; one senator said she could not support the bill because of potential taxpayer exposure but agreed to a recorded reservation rather than a straight no. At the committee vote the chair (Senator Chang) recorded a yes; other committee members registered reservations or opposing votes on the record while the final committee report adopted the bill with the agreed amendments.

Supporters described the measure as a targeted, temporary instrument to reduce financing costs for projects that will lower long-term energy costs for customers. Critics said that even with amendments the bill could create contingent liability and recommended greater transparency on terms, limits and procurement exemptions.

The bill as amended applies to future PPAs and community-based renewable energy projects (the committee accepted an amendment to include such projects) and requires Budget & Finance to complete due diligence within 30 days before stepping in. The committee said the changes are intended to be limited in scope and to preserve the State’s protection from open-ended obligation.

The committee passed the amended bill and recorded its vote: the chair voted aye; the vice chair and some members registered reservations on the record while others recorded yes or no votes. The bill will move forward to the next stage with the committee’s amendments.