In November, voters in Washington state voted to adopt ballot initiative 937 (“I-937”) to guarantee that no less than 15% of the electricity from the state’s largest utilities will come from renewable resources by 2020. Voters adopted I-937 by a vote of 52% to 48%. Under I-937, electric utilities serving more than 25,000 customers in the state must meet targets for the use of eligible renewable resources or the acquisition of renewable energy credits (or a combination thereof). These utilities must meet a target of at least 3% of load from eligible renewables by January 1, 2012, 9% by January 1, 2016, and 15% by 2020 and each year thereafter.

Eligible renewable resources include water; wind; solar energy; geothermal energy; landfill gas; wave, ocean or tidal power; gas from sewage treatment facilities; biodiesel (with certain protections for old-growth and first-growth forests); biomass energy based on animal waste or solid organic fuels from wood, forest, or field residues, or dedicated energy crops that do not include either wood pieces that have been treated with chemical preservatives, black liquor from paper production, wood from old growth forests, or municipal solid waste. Facilities must have commenced operations after March 31, 1999 and either be located in the Pacific Northwest or deliver its power into Washington state on a real-time basis without shaping, storage, or integration services.

Eligible renewable resources do not include hydro facilities, which already account for approximately 66% of the state’s electricity needs; however, certain efficiency improvements and additional generation may qualify if they do not result in new water diversions or impoundments.

Renewable energy credits include all non-power attributes of the electricity they are associated with. Consequently, all environmentally related characteristics, capacity reliability, and other electrical power service attributes associated with the generation of electricity from a renewable resource will be transferred with the purchase of a credit. These characteristics include but are not limited to a facility’s fuel type, geographic location, vintage, qualification as an eligible renewable resource, avoided emissions of pollutants and greenhouse gasses.

Utilities may count certain types of distributed generation facilities at double their output and may count both acquired resources or credits at 1.2 times their base value if the associated facilities commence operation after December 31, 2005 or the developer of the associated facility used approved apprenticeship programs during facility construction.

Certain safeguards are placed on the amount of investment made in renewable generation. A utility may avoid a portion of its purchase requirement on a yearly basis if it invests four percent or more of its total annual revenue requirement on the incremental costs of eligible renewable resources, renewable energy credits, or a combination of both. Additionally, utilities and their rate payers are relieved of the purchase requirements for events beyond the reasonable control of the utility. Investor-owned utilities are entitled to recover all prudently incurred costs associated with compliance; however, they are not guaranteed recovery for payment of administrative fines associated with the failure to comply. These fines are initially set at $50 per MWH and are to be adjusted each year for inflation.

Any fines collected by the state are to be deposited into the “energy independence act special account,” which is created by I-937. These funds are dedicated to the purchase of renewable energy credits or for energy conservation projects at public facilities, local government facilities, community colleges, or state universities.

The Washington Utilities and Transportation Commission is given wide latitude to develop rules implementing I-937 as it applies to investor-owned utilities. The Department of Community, Trade, and Economic Development is charged with developing rules for non-investor-owned utilities, and is restrained to developing rules concerning only process, timelines, and documentation. Any rules need to implement the initiative must be adopted pursuant to the state’s administrative procedure act and must be adopted no later than December 31, 2007.