LOS ANGELES — Hawaii received approval from its Public Utilities Commission to issue $150 million in taxable bonds by November to fund a program that finances energy efficiency improvements for homeowners.
The Department of Business, Economic Development and Tourism needed approval from PUC, because the bonds would be repaid through a surcharge on Hawaii Electric customers' bills.
Hawaii Gov. Neil Abercrombie in June 2013 signed the legislation establishing the Green Energy Market Securitization program.
GEMS takes a proven rate-reduction bond structure and uses it to provide a low-cost financing to utility customers, its backers say.
The bonds are modeled after a well-tested financing structure used for decades by utilities to pay for power plants and other costs associated with storm recovery and stranded assets. The PUC's order marks the first time nationally that this type of financing model has been approved to provide low-cost financing for the installation of clean energy equipment.
"We're taking a well-established securitization structure and repurposing it for the benefit of underserved consumers in Hawaii, such as nonprofits, renters and lower-income folks who want to enjoy the savings of clean energy." DBEDT Director Richard Lim, who led development of the program, said in a prepared statement Friday. "Issuance of the bonds will provide a market-based mechanism to channel capital to clean energy investments that might not otherwise be undertaken."
DBEDT officials will facilitate the program and anticipate triple-A bond ratings from the three major rating agencies.
The GEMS bonds will share characteristics with a type of security known as a rate reduction bond. There have been about $50 billion of these securitization bonds issued across the country since 1997, according to DBEDT. In all but one case the bonds have achieved triple-A or equivalent ratings.
The PUC's approval allows the imposition of a Green Infrastructure Fee, which will be used to secure the bonds. The fee will be assessed on all utility ratepayer bills to ensure the bonds achieve the highest possible credit ratings, and thus lowering the amount of the fee, which is expected to be less than $2 a month for residential customers. The Green Infrastructure Fee will be offset by a reduction in the Public Benefits Fee that is currently on electric bills, resulting in little or no impact to ratepayers.
As part of the agreement, GEMs facilitators are required to evaluate the program on an ongoing basis to make sure it isn't impacting the state's other energy efficiency programs.
In the PUC report, it responded to consumer advocates concerned about this issue that the program "will offer interested stakeholders sufficient opportunity to review and consider the impacts of GEMS Program funding on the State's other clean energy priorities."
The surcharge also has to continue as long as bonds are outstanding.