CERTIFICATION OF ENROLLMENT
ENGROSSED SUBSTITUTE HOUSE BILL 1589
Chapter 351, Laws of 2024
68th Legislature
2024 Regular Session
LARGE COMBINATION UTILITIES—DECARBONIZATION
EFFECTIVE DATE: March 28, 2024
Passed by the House March 5, 2024 CERTIFICATE
Yeas 50 Nays 45
I, Bernard Dean, Chief Clerk of the
House of Representatives of the
LAURIE JINKINS State of Washington, do hereby
Speaker of the House of certify that the attached is
Representatives ENGROSSED SUBSTITUTE HOUSE BILL
1589 as passed by the House of
Representatives and the Senate on
the dates hereon set forth.
Passed by the Senate March 1, 2024
Yeas 27 Nays 22
BERNARD DEAN
DENNY HECK Chief Clerk
President of the Senate
Approved March 28, 2024 2:44 PM FILED
March 29, 2024
Secretary of State
JAY INSLEE State of Washington
Governor of the State of Washington
 ENGROSSED SUBSTITUTE HOUSE BILL 1589
AS AMENDED BY THE SENATE
Passed Legislature - 2024 Regular Session
State of Washington 68th Legislature 2023 Regular Session
By House Environment & Energy (originally sponsored by
Representatives Doglio, Fitzgibbon, Berry, Alvarado, Bateman, Ramel,
Peterson, Lekanoff, Hackney, Macri, and Kloba)
READ FIRST TIME 02/16/23.
1 AN ACT Relating to supporting Washington's clean energy economy
2 and transitioning to a clean, affordable, and reliable energy future;
3 amending RCW 19.280.030, 80.24.010, 19.405.060, 80.28.130, 80.28.365,
4 80.28.380, and 80.28.425; adding a new chapter to Title 80 RCW;
5 creating a new section; and declaring an emergency.
6 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
7 NEW SECTION. Sec. 1. (1) The legislature finds that the state's
8 gas and electrical companies face transformational change brought on
9 by new technology, emerging opportunities for customers, and state
10 clean energy laws. Chapter 19.405 RCW, the Washington clean energy
11 transformation act, and chapter 70A.65 RCW, the Washington climate
12 commitment act, require these companies to find innovative and
13 creative solutions to equitably serve their customers, provide clean
14 energy, reduce emissions, and keep rates fair, just, reasonable, and
15 sufficient.
16 (2) Gas companies that serve over 500,000 gas customers in
17 Washington state, which are also electrical companies, or large
18 combination utilities, play an important role in providing affordable
19 and reliable heating and other energy services, and in leading the
20 implementation of state climate policies. As the state transitions to
21 cleaner sources of energy, large combination utilities are an
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 1 important partner in helping their customers make smart energy
2 choices, including actively supporting the replacement of fossil
3 fuel-based space and water heating equipment and other fossil fuel-
4 based equipment with high-efficiency nonemitting equipment. Programs
5 to accelerate the adoption of efficient, nonemitting appliances have
6 the potential to allow large combination utilities to optimize the
7 use of energy infrastructure, improve the management of energy loads,
8 better manage the integration of variable renewable energy resources,
9 reduce greenhouse gas emissions from the buildings sector, mitigate
10 the environmental impacts of utility operations and power purchases,
11 and improve health outcomes for occupants. Legislative clarity is
12 important for utilities to offer programs and services, including
13 incentives, in the decarbonization of homes and buildings for their
14 customers.
15 (3) In order to meet the statewide greenhouse gas limits in the
16 energy sectors of the economy, more resources must be directed toward
17 achieving decarbonization of residential and commercial heating loads
18 and other loads that are served with fossil fuels, while continuing
19 to protect all customers, but especially low-income customers,
20 vulnerable populations, highly impacted communities, and overburdened
21 communities. The legislature finds that regulatory innovation may be
22 needed to remove barriers that large combination utilities may face
23 to meet the state's public policy objectives and expectations. The
24 enactment of chapter 188, Laws of 2021 (Engrossed Substitute Senate
25 Bill No. 5295) began that regulatory transition from traditional
26 cost-of-service regulation, with investor-owned gas and electrical
27 companies using forward-looking multiyear rate plans and taking steps
28 toward performance-based regulation. These steps are intended to
29 provide certainty and stability to both customers and to investor-
30 owned gas and electrical companies, aligning public policy objectives
31 with investments, safety, and reliability.
32 (4) The legislature finds that as Washington transitions to 100
33 percent clean electricity and as the state implements the Washington
34 climate commitment act, switching from fossil fuel-based heating
35 equipment and other fossil fuel-based appliances to high-efficiency
36 nonemitting equipment will reduce climate impacts and fuel price
37 risks for customers in the long term. This new paradigm requires a
38 thoughtful transition to decarbonize the energy system to ensure that
39 all customers benefit from the transition, that customers are
40 protected, are not subject to sudden price shocks, and continue to
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 1 receive needed energy services, with an equitable allocation of
2 benefits and burdens. This transition will require careful and
3 integrated planning by and between utilities, the commission, and
4 customers, as well as new regulatory tools.
5 (5) It is the intent of the legislature to require large
6 combination utilities to decarbonize their systems by: (a)
7 Prioritizing efficient and cost-effective measures to transition
8 customers off of the direct use of fossil fuels at the lowest
9 reasonable cost to customers; (b) investing in the energy supply,
10 storage, delivery, and demand-side resources that will be needed to
11 serve any increase in electrical demand affordably and reliably; (c)
12 maintaining safety and reliability as the gas system undergoes
13 transformational changes; (d) integrating zero-carbon and carbon-
14 neutral fuels to serve high heat and industrial loads where
15 electrification may not be technically feasible; (e) managing peak
16 demand of the electric system; and (f) ensuring an equitable
17 distribution of benefits to, and reduction of burdens for, vulnerable
18 populations, highly impacted communities, and overburdened
19 communities that have historically been underserved by utility energy
20 efficiency programs, and may be disproportionately impacted by rising
21 fuel and equipment costs or experience high energy burden.
22 (6) It is the intent of the legislature to support this
23 transition by adopting requirements for large combination utilities
24 to conduct integrated system planning to develop specific actions
25 supporting gas system decarbonization and electrification, and
26 reduction in the gas rate base.
27 (7) It is the intent of the legislature to encourage a robust
28 competitive wholesale market for generation, storage, and demand-side
29 resources to serve the state's electrical companies, other electric
30 utilities, and end-users that secure their own power supply.
31 NEW SECTION. Sec. 2. The definitions in this section apply
32 throughout this chapter unless the context clearly requires
33 otherwise.
34 (1) "Carbon dioxide equivalent" has the same meaning as provided
35 in RCW 70A.65.010.
36 (2) "Combined heat and power" has the same meaning as provided in
37 RCW 19.280.020.
38 (3) "Commission" means the utilities and transportation
39 commission.
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 1 (4) "Conservation and efficiency resources" means any reduction
2 in electric or natural gas consumption that results from increases in
3 the efficiency of energy use, production, transmission,
4 transportation, or distribution.
5 (5) "Cost effective" means that a project or resource is, or is
6 forecast to:
7 (a) Be reliable and available within the time it is needed; and
8 (b) Reduce greenhouse gas emissions and meet or reduce the energy
9 demand or supply an equivalent level of energy service to the
10 intended customers at an estimated long-term incremental system cost
11 no greater than that of the least-cost similarly reliable and
12 available alternative project or resource, or any combination
13 thereof, including the cost of compliance with chapter 70A.65 RCW,
14 based on the forward allowance ceiling price of allowances approved
15 by the department of ecology under RCW 70A.65.160.
16 (6) "Costs of greenhouse gas emissions" means the costs of
17 greenhouse gas emissions established in RCW 80.28.395 and 80.28.405.
18 (7) "Delivery system" includes any power line, pipe, equipment,
19 apparatus, mechanism, machinery, instrument, or ancillary facility
20 used by a large combination utility to deliver electricity or gas for
21 ultimate consumption by a customer of the large combination utility.
22 (8) "Demand flexibility" means the capacity of demand-side loads
23 to change their consumption patterns hourly or on another timescale.
24 (9) "Electrical company" has the same meaning as provided in RCW
25 80.04.010.
26 (10)(a) "Electrification" means the installation of energy
27 efficient electric end-use equipment.
28 (b) Electrification programs may include weatherization and
29 conservation and efficiency measures.
30 (11) "Electrification readiness" means upgrades or changes
31 required before the installation of energy efficient electric end-use
32 equipment to prevent heat loss from homes including, but not limited
33 to: Structural repairs, such as roof repairs, preweatherization,
34 weatherization, and electrical panel and wiring upgrades.
35 (12) "Emissions baseline" means the actual cumulative greenhouse
36 gas emissions of a large combination utility, calculated pursuant to
37 chapter 70A.65 RCW, for the five-year period beginning January 1,
38 2015, and ending December 31, 2019.
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 1 (13) "Emissions reduction period" means one of five periods of
2 five calendar years each, with the five periods beginning on January
3 1st of calendar years 2030, 2035, 2040, 2045, and 2050, respectively.
4 (14) "Emissions reduction target" means a targeted reduction of
5 projected cumulative greenhouse gas emissions of a large combination
6 utility approved by the commission for an emissions reduction period
7 that is at least as stringent as the limits established in RCW
8 70A.45.020.
9 (15) "Gas company" has the same meaning as provided in RCW
10 80.04.010.
11 (16) "Geographically targeted electrification" means the
12 geographically targeted transition of a portion of gas customers of
13 the large combination utility with an intent to electrify loads of
14 such customers and, in conjunction, to reduce capital and operational
15 costs of gas operations of the large combination utility serving such
16 customers.
17 (17) "Greenhouse gas" has the same meaning as provided in RCW
18 70A.45.010.
19 (18) "Highly impacted community" has the same meaning as provided
20 in RCW 19.405.020.
21 (19) "Integrated system plan" means a plan that the commission
22 may approve, reject, or approve with conditions pursuant to section 3
23 of this act.
24 (20) "Large combination utility" means a public service company
25 that is both an electrical company and a gas company that serves more
26 than 800,000 retail electric customers and 500,000 retail gas
27 customers in the state of Washington as of June 30, 2024.
28 (21) "Low-income" has the same meaning as provided in RCW
29 19.405.020.
30 (22) "Lowest reasonable cost" means the lowest cost mix of
31 demand-side and supply side resources and decarbonization measures
32 determined through a detailed and consistent analysis of a wide range
33 of commercially available resources and measures. At a minimum, this
34 analysis must consider long-term costs and benefits, market-
35 volatility risks, resource uncertainties, resource dispatchability,
36 resource effect on system operation, the risks imposed on the large
37 combination utility and its ratepayers, public policies regarding
38 resource preference adopted by Washington state or the federal
39 government, the cost of risks associated with environmental effects
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 1 including potential spills and emissions of carbon dioxide, and the
2 need for security of supply.
3 (23) "Multiyear rate plan" means a multiyear rate plan of a large
4 combination utility filed with the commission pursuant to RCW
5 80.28.425.
6 (24) "Natural gas" has the same meaning as provided in RCW
7 19.405.020.
8 (25) "Nonemitting electric generation" has the same meaning as
9 provided in RCW 19.405.020.
10 (26) "Nonpipeline alternative" means activities or investments
11 that delay, reduce, or avoid the need to build, upgrade, or repair
12 gas plant, such as pipelines and service lines.
13 (27) "Overburdened community" has the same meaning as provided in
14 RCW 70A.65.010.
15 (28) "Overgeneration event" has the same meaning as provided in
16 RCW 19.280.020.
17 (29) "Renewable resource" has the same meaning as provided in RCW
18 19.405.020.
19 (30) "Supply side resource" means, as applicable: (a) Any
20 resource that can provide capacity, electricity, or ancillary
21 services to the large combination utility's electric delivery system;
22 or (b) any resource that can provide conventional or nonconventional
23 gas supplies to the large combination utility's gas delivery system.
24 (31) "System cost" means actual direct costs or an estimate of
25 all direct costs of a project or resource over its effective life
26 including, if applicable: The costs of transmission and distribution
27 to the customers; waste disposal costs; permitting, siting,
28 mitigation, and end-of-cycle decommissioning and remediation costs;
29 fuel costs, including projected increases; resource integration and
30 balancing costs; and such quantifiable environmental costs and
31 benefits and other energy and nonenergy benefits as are directly
32 attributable to the project or resource, including flexibility,
33 resilience, reliability, greenhouse gas emissions reductions, and air
34 quality.
35 (32) "Vulnerable populations" has the same meaning as provided in
36 RCW 19.405.020.
37 NEW SECTION. Sec. 3. (1) The legislature finds that large
38 combination utilities are subject to a range of reporting and
39 planning requirements as part of the clean energy transition. The
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 1 legislature further finds that current natural gas integrated
2 resource plans under development might not yield optimal results for
3 timely and cost-effective decarbonization. To reduce regulatory
4 barriers, achieve equitable and transparent outcomes, and integrate
5 planning requirements, the commission may consolidate a large
6 combination utility's planning requirements for both gas and electric
7 operations, including consolidation into a single integrated system
8 plan that is approved by the commission.
9 (2)(a) By July 1, 2025, the commission shall complete a rule-
10 making proceeding to implement consolidated planning requirements for
11 gas and electric services for large combination utilities that may
12 include plans required under: (i) RCW 19.280.030; (ii) RCW
13 19.285.040; (iii) RCW 19.405.060; (iv) RCW 80.28.380; (v) RCW
14 80.28.365; (vi) RCW 80.28.425; and (vii) RCW 80.28.130. The
15 commission may extend the rule-making proceeding for 90 days for good
16 cause shown. The large combination utilities' filing deadline
17 required in subsection (4) of this section will be extended
18 commensurate to the rule-making extension period set by the
19 commission. Subsequent planning requirements for future integrated
20 system plans must be fulfilled on a timeline set by the commission.
21 Large combination utilities that file integrated system plans are no
22 longer required to file separate plans that are required in an
23 integrated system plan. The statutorily required contents of any plan
24 consolidated into an integrated system plan must be met by the
25 integrated system plan.
26 (b) In its order adopting rules or issuing a policy statement
27 approving the consolidation of planning requiremen