Electric utility investments

AN ACT Relating to providing additional investment options for 1
electric utilities under the 20 percent alternative compliance option 2
of the clean energy transformation act's greenhouse gas neutral 3
standard; and amending RCW 19.405.040. 4
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:5
Sec. 1. RCW 19.405.040 and 2019 c 288 s 4 are each amended to 6
read as follows: 7
(1) It is the policy of the state that all retail sales of 8
electricity to Washington retail electric customers be greenhouse gas 9
neutral by January 1, 2030. 10
(a) For the four-year compliance period beginning January 1, 11
2030, and for each multiyear compliance period thereafter through 12
December 31, 2044, an electric utility must demonstrate its 13
compliance with this standard using a combination of nonemitting 14
electric generation and electricity from renewable resources, or 15
alternative compliance options, as provided in this section. To 16
achieve compliance with this standard, an electric utility must: (i) 17
Pursue all cost-effective, reliable, and feasible conservation and 18
efficiency resources to reduce or manage retail electric load, using 19
the methodology established in RCW 19.285.040, if applicable; and 20
(ii) use electricity from renewable resources and nonemitting 21
H-2993.1
HOUSE BILL 2581
State of Washington 69th Legislature 2026 Regular Session
By Representatives Fitzgibbon, Ybarra, Reed, Parshley, Ramel, and
Pollet
Read first time 01/20/26. Referred to Committee on Environment &
Energy.
p. 1 HB 2581
electric generation in an amount equal to ((one hundred)) 100 percent 1
of the utility's retail electric loads over each multiyear compliance 2
period. An electric utility must achieve compliance with this 3
standard for the following compliance periods: January 1, 2030, 4
through December 31, 2033; January 1, 2034, through December 31, 5
2037; January 1, 2038, through December 31, 2041; and January 1, 6
2042, through December 31, 2044. 7
(b) Through December 31, 2044, an electric utility may satisfy up 8
to ((twenty)) 20 percent of its compliance obligation under (a) of 9
this subsection with an alternative compliance option consistent with 10
this section. An alternative compliance option may include any 11
combination of the following: 12
(i) Making an alternative compliance payment under RCW 13
19.405.090(2); 14
(ii) Using unbundled renewable energy credits, provided that 15
there is no double counting of any nonpower attributes associated 16
with renewable energy credits within Washington or programs in other 17
jurisdictions, as follows: 18
(A) Unbundled renewable energy credits produced from eligible 19
renewable resources, as defined under RCW 19.285.030, which may be 20
used by the electric utility for compliance with RCW 19.285.040 and 21
this section as provided under RCW 19.285.040(2)(e); and22
(B) Unbundled renewable energy credits, other than those included 23
in (b)(ii)(A) of this subsection, that represent electricity 24
generated within the compliance period; 25
(iii) Investing in energy transformation projects, including 26
additional conservation and efficiency resources beyond what is 27
otherwise required under this section, provided the projects meet the 28
requirements of subsection (2) of this section and are not credited 29
as resources used to meet the standard under (a) of this subsection; 30
((or))31
(iv) Using electricity from an energy recovery facility using 32
municipal solid waste as the principal fuel source, where the 33
facility was constructed prior to 1992, and the facility is operated 34
in compliance with federal laws and regulations and meets state air 35
quality standards. An electric utility may only use electricity from 36
such an energy recovery facility if the department and the department 37
of ecology determine that electricity generation at the facility 38
provides a net reduction in greenhouse gas emissions compared to any 39
other available waste management best practice. The determination 40
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must be based on a life-cycle analysis comparing the energy recovery 1
facility to other technologies available in the jurisdiction in which 2
the facility is located for the waste management best practices of 3
waste reduction, recycling, composting, and minimizing the use of a 4
landfill; or5
(v) Investments in: (A) Addressing transmission capacity 6
constraints; (B) enabling and integrating distributed energy 7
resources, including analytical capabilities and system component 8
upgrades; (C) upgrading transmission to meet evolving needs related 9
to integrating distributed energy resources; (D) substation 10
supervisory control and data acquisition; (E) enabling higher 11
penetration of distributed energy resources on a circuit; and (F) 12
electric vehicle charging infrastructure, electric vehicle-to-grid 13
integration, electric school buses, and electric vehicles for 14
community-based organizations serving low-income or vulnerable 15
populations.16
(c) Every million dollars spent on an energy transformation 17
project or an investment described in (b)(v) of this subsection 18
counts as 0.25 percent compliance towards the 20 percent alternative 19
compliance option allowed under this subsection.20
(d) For the investments described in (b)(v) of this subsection to 21
count towards the 20 percent alternative compliance, the investments 22
may not: (i) Use revenue derived from chapter 70A.535 RCW, a state 23
program, state appropriations, or grant funding; or (ii) be required 24
to comply with another statute, rule, or other legal requirement.25
(((c))) (e) Electricity from renewable resources used to meet the 26
standard under (a) of this subsection must be verified by the 27
retirement of renewable energy credits. Renewable energy credits must 28
be tracked and retired in the tracking system selected by the 29
department. 30
(((d))) (f) Hydroelectric generation used by an electric utility 31
in meeting the standard under (a) of this subsection may not include 32
new diversions, new impoundments, new bypass reaches, or expansion of 33
existing reservoirs constructed after May 7, 2019, unless the 34
diversions, bypass reaches, or reservoir expansions are necessary for 35
the operation of a pumped storage facility that: (i) Does not 36
conflict with existing state or federal fish recovery plans; and (ii) 37
complies with all local, state, and federal laws and regulations.38
(((e))) (g) Nothing in (((d))) (f) of this subsection precludes 39
an electric utility that owns and operates hydroelectric generating 40
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facilities, or the owner of a hydroelectric generating facility whose 1
energy output is marketed by the Bonneville power administration, 2
from making efficiency or other improvements to its hydroelectric 3
generating facilities existing as of May 7, 2019, or from installing 4
hydroelectric generation in pipes, culverts, irrigation canals, and 5
other man-made waterways, as long as those changes do not create 6
conflicts with existing state or federal fish recovery plans and 7
comply with all local, state, and federal laws and regulations.8
(((f))) (h) Nonemitting electric generation used to meet the 9
standard under (a) of this subsection must be generated during the 10
compliance period and must be verified by documentation that the 11
electric utility owns the nonpower attributes of the electricity 12
generated by the nonemitting electric generation resource.13
(((g))) (i) Nothing in this section prohibits an electric utility 14
from purchasing or exchanging power from the Bonneville power 15
administration. 16
(2) Investments in energy transformation projects used to satisfy 17
an alternative compliance option provided under subsection (1)(b) of 18
this section must use criteria developed by the department of 19
ecology, in consultation with the department and the commission. For 20
the purpose of crediting an energy transformation project toward the 21
standard in subsection (1)(a) of this section, the department of 22
ecology must establish a conversion factor of emissions reductions 23
resulting from energy transformation projects to megawatt-hours of 24
electricity from nonemitting electric generation that is consistent 25
with the emission factors for unspecified electricity, or for energy 26
transformation projects in the transportation sector, consistent with 27
default emissions or conversion factors established by other 28
jurisdictions for clean alternative fuels. Emissions reductions from 29
energy transformation projects must be: 30
(a) Real, specific, identifiable, and quantifiable;31
(b) Permanent: The department of ecology must look to other 32
jurisdictions in setting this standard and make a reasonable 33
determination on length of time; 34
(c) Enforceable by the state of Washington; 35
(d) Verifiable; 36
(e) Not required by another statute, rule, or other legal 37
requirement; and 38
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(f) Not reasonably assumed to occur absent investment, or if an 1
investment has already been made, not reasonably assumed to occur 2
absent additional funding in the near future. 3
(3) Energy transformation projects must be associated with the 4
consumption of energy in Washington and must not create a new use of 5
fossil fuels that results in a net increase of fossil fuel usage.6
(4) The compliance eligibility of energy transformation projects 7
may be scaled or prorated by an approved protocol in order to 8
distinguish effects related to reductions in electricity usage from 9
reductions in fossil fuel usage. 10
(5) Any compliance obligation fulfilled through an investment in 11
an energy transformation project is eligible for use only: (a) By the 12
electric utility that makes the investment; (b) if the investment is 13
made by the Bonneville power administration, by electric utilities 14
that are preference customers of the Bonneville power administration; 15
or (c) if the investment is made by a joint operating agency 16
organized under chapter 43.52 RCW, by a member of the joint operating 17
agency. An electric utility making an investment in partnership with 18
another electric utility or entity may claim credit proportional to 19
its share invested in the total project cost. 20
(6)(a) In meeting the standard under subsection (1) of this 21
section, an electric utility must, consistent with the requirements 22
of RCW 19.285.040, if applicable, pursue all cost-effective, 23
reliable, and feasible conservation and efficiency resources, and 24
demand response. In making new investments, an electric utility must, 25
to the maximum extent feasible: 26
(i) Achieve targets at the lowest reasonable cost, considering 27
risk; 28
(ii) Consider acquisition of existing renewable resources; and29
(iii) In the acquisition of new resources constructed after May 30
7, 2019, rely on renewable resources and energy storage, insofar as 31
doing so is consistent with (a)(i) of this subsection.32
(b) Electric utilities subject to RCW 19.285.040 must demonstrate 33
pursuit of all conservation and efficiency resources through 34
compliance with the requirements in RCW 19.285.040.35
(7) An electric utility that fails to meet the requirements of 36
this section must pay the administrative penalty established under 37
RCW 19.405.090(1), except as otherwise provided in this chapter.38
(8) In complying with this section, an electric utility must, 39
consistent with the requirements of RCW 19.280.030 and 19.405.140, 40
p. 5 HB 2581
ensure that all customers are benefiting from the transition to clean 1
energy: Through the equitable distribution of energy and nonenergy 2
benefits and reduction of burdens to vulnerable populations and 3
highly impacted communities; long-term and short-term public health 4
and environmental benefits and reduction of costs and risks; and 5
energy security and resiliency. 6
(9) Affected market customers must comply with the standard 7
established under subsection (1) of this section. 8
(10) A market customer that purchases electricity exclusively 9
from carbon-free resources and eligible renewable resources, as 10
defined in RCW 19.285.030 as of January 1, 2019, pursuant to a 11
special contract with an investor-owned utility approved, prior to 12
May 7, 2019, by order of the commission is subject to the 13
requirements of such an order and not to the standard established in 14
this section. For purposes of interpreting any such special contract, 15
chapter 19.285 RCW, as in effect on January 1, 2019, is not, either 16
directly or indirectly, amended or supplemented. 17
(11) To reduce costs for utility customers or avoid exceeding the 18
cost impact limit in RCW 19.405.060(3)(a), a multistate electric 19
utility with fewer than ((two hundred fifty thousand )) 250,000 20
customers in Washington may apply the total amount of megawatt-hours 21
of coal-fired resources eliminated from the utility's allocation of 22
electricity before December 31, 2025, as an equivalent amount of 23
megawatt-hours of nonemitting electric generation or electricity from 24
renewable resources required to comply with subsection (1)(a) of this 25
section. The utility must demonstrate that for every megawatt-hour of 26
early action compliance credit there is a real, permanent reduction 27
in greenhouse gas emissions in the western interconnection directly 28
associated with that credit. A multistate electric utility must 29
request to use early action compliance credit in its clean energy 30
implementation plan that is submitted under RCW 19.405.060. The 31
multistate electric utility must specify in its clean energy 32
implementation plan the compliance years to which the early action 33
compliance credit will apply, but in no event may the multistate 34
electric utility use the early action compliance credits beyond 2035. 35
The commission must establish conditions for use of early action 36
compliance credits, including a determination of whether action 37
constitutes early action, before the multistate electric utility's 38
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use of early action compliance credits in a clean energy 1
implementation plan. 2
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