Maryland Strategic Energy Investment Fund - Mandated Uses - Climate Change Programs

EXPLANATION: CAPITALS INDICATE MATTER ADDED TO EXISTING LAW.
[Brackets] indicate matter deleted from existing law.
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HOUSE BILL 1040
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By: Delegates Stein and Watson
Introduced and read first time: February 9, 2026
Assigned to: Environment and Transportation and Appropriations

A BILL ENTITLED

AN ACT concerning 1

Maryland Strategic Energy Investment Fund – Mandated Uses – Climate 2
Change Programs 3

FOR the purpose of requiring that money in the Maryland Strategic Energy Investment 4
Fund be allocated in certain amounts in certain years to certain programs that 5
reduce the impact of climate change ; and generally relating to the Maryland 6
Strategic Energy Investment Fund. 7

BY repealing and reenacting, with amendments, 8
Article – State Government 9
Section 9–20B–05 10
Annotated Code of Maryland 11
(2021 Replacement Volume and 2025 Supplement) 12

BY repealing and reenacting, with amendments, 13
Article – State Government 14
Section 9–20B–05(g–1) 15
Annotated Code of Maryland 16
(2021 Replacement Volume and 2025 Supplement) 17
(As enacted by Section 1 of Chapter 595 of the Acts of the General Assembly of 2024) 18

SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 19
That the Laws of Maryland read as follows: 20

Article – State Government 21

9–20B–05. 22

(a) There is a Maryland Strategic Energy Investment Fund. 23

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(b) The purpose of the Fund is to implement the Strategic Energy Investment 1
Program. 2

(c) The Administration shall administer the Fund. 3

(d) (1) The Fund is a special, nonlapsing fund that is not subject to § 7–302 of 4
the State Finance and Procurement Article. 5

(2) The Treasurer shall hold the Fund separately and the Comptroller shall 6
account for the Fund. 7

(e) The Fund consists of: 8

(1) all of the proceeds from the sale of allowances under § 2–1002(g) of the 9
Environment Article; 10

(2) money appropriated in the State budget to the Program; 11

(3) repayments and prepayments of principal and interest on loans made 12
from the Fund; 13

(4) compliance fees paid under § 7–705 of the Public Utilities Article; 14

(5) money received from any public or private source for the benefit of the 15
Fund; 16

(6) money transferred from the Public Service Commission under § 17
7–207.2(d)(3) of the Public Utilities Article; and 18

(7) money distributed under § 2–614.1 of the Tax – General Article. 19

(f) The Administration shall use the Fund: 20

(1) to invest in the promotion, development, and implementation of: 21

(i) cost–effective energy efficiency and conservation programs, 22
projects, or activities, including measurement and verification of energy savings; 23

(ii) renewable and clean energy resources; 24

(iii) climate change programs directly related to reducing or 25
mitigating the effects of climate change; and 26

(iv) demand response programs that are designed to promote 27
changes in electric usage by customers in response to: 28

1. changes in the price of electricity over time; or 29
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2. incentives designed to induce lower electricity use at times 1
of high wholesale market prices or when system reliability is jeopardized; 2

(2) to provide targeted programs, projects, activities, and investments to 3
reduce electricity consumption by customers in the low –income and moderate –income 4
residential sectors; 5

(3) to provide supplemental funds for low –income energy assistance 6
through the Electric Universal Service Program established under § 7 –512.1 of the Public 7
Utilities Article and other electric assistance programs in the Department of Human 8
Services; 9

(4) to provide rate relief by offset ting electricity rates of residential 10
customers, including an offset of surcharges imposed on ratepayers under Title 7, Subtitle 11
2, Part II of the Public Utilities Article; 12

(5) to provide grants, loans, and other assistance and investment as 13
necessary a nd appropriate to implement the purposes of the Program as set forth in § 14
9–20B–03 of this subtitle; 15

(6) to implement energy–related public education and outreach initiatives 16
regarding reducing energy consumption and greenhouse gas emissions; 17

(7) to provide rebates under the Electric Vehicle Recharging Equipment 18
Rebate Program established under § 9–2009 of this title; 19

(8) to provide grants to encourage combined heat and power projects at 20
industrial facilities; 21

(9) to provide at least $1,200,000 in each fiscal year for fiscal year 2025 22
through fiscal year 2028 to the Climate Technology Founder’s Fund established under § 23
10–858 of the Economic Development Article; 24

(10) subject to subsection (f–2) of this section, to provide at least $2,100,000 25
in funding each fiscal year to the Maryland Energy Innovation Fund established under § 26
10–835 of the Economic Development Article; 27

(11) to provide at least $500,000 each year to the Resiliency Hub Grant 28
Program Fund under § 9–2011 of this title; 29

(12) to provide grants through the Customer –Sited Solar Program under § 30
9–2016 of this title; 31

(13) notwithstanding subsection (g) of this section, to pay costs associated 32
with the Air and Radiation Administration within the Department of the Environment; 33
[and] 34
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(14) BEFORE PROVIDING ANY OTHER FUNDING IN THIS SECTION, TO 1
PROVIDE AT LEAST $365,000,000 IN EACH FISCAL YEAR FOR FISCAL YEAR S 2028 2
THROUGH 2032 TO PROGRAMS THAT RED UCE THE IMPACT OF CL IMATE CHANGE, 3
INCLUDING: 4

(I) TO THE ADMINISTRATION IN THE FOLLOWING AMOUNTS 5
FOR THE PURPOSES SPECIFIED: 6

1. $100,000,000 TO PROVIDE INCENTIVES TO REPLACE: 7

A. GAS AND RESISTIVE EL ECTRIC STOVES WITH 8
INDUCTION ELECTRIC STOVES; 9

B. RESISTIVE ELECTRIC A ND DELIVERED –FUEL HEAT 10
SYSTEMS WITH HEAT PUMPS AND WINDOW HEAT PUMPS; AND 11

C. RESISTIVE ELECTRIC W ATER HEATERS WITH HE AT 12
PUMP WATER HEATERS; 13

2. $50,000,000 FOR PROGRAMS TO INCREASE SOLAR 14
ENERGY DEPLOYMENT , INCLUDING SOLAR CANOPY DUAL –USE TECHNOLOGY , 15
COMMUNITY SOLAR, AND SOLAR ENERGY EQUITY GRANTS; 16

3. $25,000,000 FOR PROGRAMS RELATING TO ELECTRIC 17
VEHICLE SUPPLY EQUIP MENT, MEDIUM–DUTY AND HEAVY –DUTY ZERO EMISSION 18
VEHICLE GRANTS, AND ZERO EMISSION VEHICLE TAX CREDITS; 19

4. $20,000,000 FOR PROGRAMS REGARDI NG ENERG Y 20
EFFICIENCY EQUITY GRANTS; 21

5. $10,000,000 FOR PROGRAMS REGARDI NG SMART 22
ENERGY COMMUNITIES; 23

6. $10,000,000 FOR PROGRAMS REGARDI NG 24
RESILIENCY THROUGH I NSTALLATION OF MICRO GRIDS, RESILIENCY HUBS , AND 25
OTHER DISTRIBUTED ENERGY RESOURCES; 26

7. $10,000,000 FOR PROGRAMS REGARDI NG ENERGY 27
INFRASTRUCTURE; 28

8. $6,000,000 FOR RESIDENTIAL AND COMMERCIAL 29
CLEAN ENERGY REBATES; 30
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9. $2,000,000 FOR PROGRAMS REGARDING C APITAL 1
PROJECTS THAT LEAD TO INCREASED CLEAN ENERGY DEVELOPMENT IN THE STATE; 2
AND 3

10. $1,000,000 FOR PROGRAMS REGARDI NG OFFSHORE 4
WIND; 5

(II) TO THE DEPARTMENT OF THE ENVIRONMENT IN THE 6
FOLLOWING AMOUNTS AND FOR THE PURPOSES SPECIFIED: 7

1. $8,000,000 FOR TECHNOLOGY SUPPO RT, 8
COMMUNICATIONS, AND MARKETING REGARDING CLEAN ENERGY; AND 9

2. $5,000,000 FOR PROGRAMS REGARDI NG CLIMATE 10
CHANGE; 11

(III) TO THE STATE DEPARTMENT OF EDUCATION IN THE 12
FOLLOWING AMOUNTS FOR THE PURPOSES SPECIFIED: 13

1. $25,000,000 TO ASSIST COUNTY BOARDS OF 14
EDUCATION AND THE BALTIMORE CITY BOARD OF SCHOOL COMMISSIONERS IN 15
REDUCING THE CARBON EMISSIONS AS A DIRECT OR INDIR ECT RESULT FROM 16
SCHOOL FACILITIES AND ACTIVITIES; AND 17

2. $20,000,000 TO ASSIST COUNTY BOA RDS OF 18
EDUCATION AND THE BALTIMORE CITY BOARD OF SCHOOL COMMISSIONERS IN 19
ACQUIRING AND IMPLEMENTING ELECTRIC SCHOOL BUSES; 20

(IV) $1,000,000 TO THE MARYLAND DEPARTMENT OF LABOR 21
FOR A N INDUSTRY –LED, REGIONAL–IN–FOCUS, COMPETITIVE WORKFORC E 22
DEVELOPMENT GRANT PROGRAM; 23

(V) $5,000,000 TO THE DEPARTMENT OF GENERAL SERVICES 24
FOR ENERGY EFFICIENCY INITIATIVES; 25

(VI) $50,000,000 TO THE MARYLAND CLEAN ENERGY CENTER 26
ESTABLISHED UNDER § 10–806 OF THE ECONOMIC DEVELOPMENT ARTICLE; AND 27

(VII) $2,000,000 TO THE MARYLAND ENERGY INNOVATION 28
INSTITUTE ESTABLISHED UNDER § 10–829 OF THE ECONOMIC DEVELOPMENT 29
ARTICLE; AND 30

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[(14)] (15) to pay the expenses of the Program. 1

(f–1) (1) Any funding provided under subsection (f)(9) of this section that is not 2
spent in a given fiscal year shall revert to the Fund in the following fiscal year. 3

(2) The Administration may provide additional funding for the purposes 4
stated in subsection (f)(9) of this section. 5

(f–2) Of the funds transferred to the Maryland Energy Innovation Fund under 6
subsection (f)(10) of this section: 7

(1) at least $1,200,000 may be used to fund the Maryland Clean Energy 8
Center established under § 10–806 of the Economic Development Article; and 9

(2) at least $900,000 may be used to fund the Maryland Energy Innovation 10
Institute established under § 10–829 of the Economic Development Article. 11

(g) [Proceeds] EXCEPT AS REQUIRED BY SUBSECTION (F)(14) OF THIS 12
SECTION, PROCEEDS received by the Fund from the sale of allowances under § 2–1002(g) 13
of the Environment Article shall be allocated as follows: 14

(1) at least [50%] 65% shall be credited to an energy assistance account to 15
be used for the Electric Universal Service Program and other electricity assistance 16
programs in the Department of Human Services; 17

(2) at least [20%] 35% shall be credited to a low and moderate income 18
efficiency and conservation programs account and to a general efficiency and conservation 19
programs account for energy efficiency and conservation programs, projects, or activities 20
and demand response programs, of which at least one–half shall be targeted to the low and 21
moderate income efficiency and conservation programs account for: 22

(i) the low–income residential sector at no cost to the participants 23
of the programs, projects, or activities; and 24

(ii) the moderate–income residential sector; AND 25

(3) [at least 20% shall be credited to a renewable and clean energy 26
programs account for: 27

(i) renewable and clean energy programs and initiatives; 28

(ii) energy–related public education and outreach; and 29

(iii) climate change and resiliency programs; and 30

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(4) up to 10%, but not more than ] $7,500,000[,] shall be credited to an 1
administrative expense account for costs related to the administration of the Fund, 2
including the review of electric company plans for achieving electricity savings and demand 3
reductions that the electric companies are required under law to submit to the 4
Administration. 5

(h) (1) Energy efficiency and conservation programs under subsection (g)(2) of 6
this section include: 7

(i) low–income energy efficiency programs; 8

(ii) residential and small business energy efficiency programs; 9

(iii) commercial and industrial energy efficiency programs; 10

(iv) State and local energy efficiency programs; 11

(v) demand response programs; 12

(vi) loan programs and alternative financing mechanisms; and 13

(vii) grants to training funds and other organizations supporting job 14
training for deployment of energy efficiency and energy conservation technology and 15
equipment. 16

(2) Energy–related public education and outreach and renewable and clean 17
energy programs and initiatives under subsection (g)(3)(i) and (ii) of this section include: 18

(i) production incentives for specified renewable energy sources; 19

(ii) expansion of existing grant programs for solar, geothe rmal, and 20
wind programs; 21

(iii) loan programs and alternative financing mechanisms; and 22

(iv) consumer education and outreach programs that are designed to 23
reach low–income communities. 24

(i) (1) Except as provided in paragraphs (2), (3), and (4) of this subsection, 25
compliance fees paid under § 7 –705(b) of the Public Utilities Article may be used only to 26
make loans and grants to support the creation of new Tier 1 renewable energy sources in 27
the State that are owned by or directly benefit: 28

(i) low– to moderate–income communities located in a census tract 29
with an average median income at or below 80% of the average median income for the State; 30
or 31

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(ii) overburdened or underserved communities, as defined in § 1–701 1
of the Environment Article. 2

(2) Compliance fees paid under § 7 –705(b)(2)(i)2 of the Public Utilities 3
Article shall be accounted for separately within the Fund and may be used only to make 4
loans and grants to support the creation of new solar energy sources in the State that are 5
owned by or directly benefit: 6

(i) low– to moderate–income communities located in a census tract 7
with an average median income at or below 80% of the average median income for the State; 8

(ii) overburdened or underserved communities, as defined in § 1–701 9
of the Environment Article; or 10

(iii) households with low to moderate income, as defined in § 9–2016 11
of this title. 12

(3) For fiscal year 2026 only, up to $100,000,000 of compliance fees paid 13
under §§ 7–705(b) and 7–705(b)(2)(i)2 of the Public Utilities Article shall be accounted for 14
separately within the Fund and may be used for solar development on State government 15
property and local government clean energy projects. 16

(4) (i) Subject to subparagraphs (ii), (iii), and (iv) of this paragraph, 17
compliance fees paid under § 7 –705 of the Public Utilities Article may be used to provide 18
grants to electric companies to be refunded or credited to each residential distribution 19
customer based on the customer’s consumption of electricity supply that is subject to the 20
renewable energy portfolio standard. 21

(ii) The refunding or crediting of amounts to residential distribution 22
customers shall be identified on the customer’s bill as a line item identified as a “legislative 23
energy relief refund”. 24

(iii) An electric company awarded a grant under this paragraph: 25

1. may not retain any of the grant funds to cover overhead 26
expenses; and 27

2. shall provide all of the grant funds to residential 28
distribution customers. 29

(iv) The process under subparagraphs (i) and (ii) of this paragraph 30
related to the refunding or crediting of amounts to residential distribution customers shall 31
be directed and overseen by the Commission. 32

(i–1) (1) (i) In this subsection the following words have the meanings 33
indicated. 34

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(ii) “Area median income” has the meaning stated in § 4–1801 of the 1
Housing and Community Development Article. 2

(iii) “Low and moderate income” means having an annual household 3
income that is at or below 120% of the area median income. 4

(2) Compliance fees paid under § 7–705(b–1) of the Public Utilities Article 5
shall be accounted for separately within the Fund and may be used only to make loans and 6
grants to promote increased opportunities for the growth and development of small, 7
minority, women –owned, and veteran–owned businesses in the State that install 8
geothermal systems in the State. 9

(j) (1) The Treasurer shall invest the money of the Fund in the same manner 10
as other State money may be invested. 11

(2) Any investment earnings of the Fund shall be paid into the Fund. 12

(3) Any repayment of principal and interest on loans made from the Fund 13
shall be paid into the Fund. 14

(4) Balances in the Fund shall be held for the benefit of the Program, shall 15
be expended solely for the purposes of the Program, and may not be used for the general 16
obligations of government. 17

(k) Expenditures from the Fund shall be made by: 18

(1) an appropriation in the annual State budget; or 19

(2) a budget amendment in accordance with § 7 –209 of the State Finance 20
and Procurement Article. 21

(l) An expenditure by budget amendment may be made under subsection (k) of 22
this section only after: 23

(1) the Administration has submitted the proposed budget amendment and 24
supporting documentation to the Senate Budget and Taxation Committee, Senate 25
Education, Energy, and the Environment Committee, House Appropriations Committee, 26
and House Economic Matters Committee; and 27

(2) the committees have had 45 days for review and comment. 28

(m) (1) A loan or grant made available from the Fund to a unit of State or local 29
government shall comply with §§ 14–416 and 17–303 of the State Finance and Procurement 30
Article. 31

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(2) At least 80% of workers participating in a project or program that 1
receives money from the Fund must reside within 50 miles of the p roject or program, or 2
another distance defined by the local jurisdiction where the project or program is located. 3

SECTION 2. AND BE IT FURTHER ENACTED, That the Laws of Maryland read 4
as follows: 5

Article – State Government 6

9–20B–05. 7

(a) There is a Maryland Strategic Energy Investment Fund. 8

(g–1) [Proceeds] EXCEPT AS REQUIRED BY SUBSECTION (F)(14) OF THIS 9
SECTION, PROCEEDS received by the Fund from compliance fees under § 7 –705(b)(2)(i)2 10
of the Public Utilities Article shall be allocated as follows: 11

(1) [beginning in fiscal year 2025, at least 20% of the proceeds shall be used 12
to provide grants to support the installation of new solar energy generating systems under 13
the Customer–Sited Solar Program; 14

(2)] up to 10% of the proceeds shall be credited to an administrative expense 15
account for costs related to the administration of the Fund; 16

[(3)] (2) proceeds collected but unused from a previous year shall be used 17
before proceeds allocated for the current year; and 18

[(4)] (3) the Administration shall reallocate to other authorized uses any 19
proceeds that are not used within 3 fiscal years after collection. 20

SECTION 3. AND BE IT FURTHER ENACTED, That the Laws of Maryland read 21
as follows: 22

Article – State Government 23

9–20B–05. 24

(g–1) [Up] EXCEPT AS REQUIRED BY SUBSE CTION (F)(14) OF THIS SECTION , 25
UP to 10% of the proceeds received by the Fund from compliance fees under § 7–705(b)(2)(i)2 26
of the Public Utilities Article shall be credited to an administrative expense account for 27
costs related to the administration of the Fund. 28

SECTION 4. AND BE IT FURTHER ENACTED, That Section 3 of this Act shall take 29
effect on the taking effect of the termination provision specified in Section 10 of Chapter 30
595 of the Acts of the General Assembly of 2024. If that termination provision takes effect, 31
Section 2 of this Act, with no further action required by the General Assembly , shall be 32
HOUSE BILL 1040 11

abrogated and of no further force and effect. This Act may not be interpreted to have any 1
effect on that termination provision. 2

SECTION 5. AND BE IT FURTHER ENACTED, That , subject to the provisions of 3
Section 4 of this Act, this Act shall take effect October 1, 2026. 4