COUNTY OF HAWAII' S COMMENTS ON HECO AND CA GUIDELINES AND STANDARDS FOR RECOVERY OF CAPITAL COSTS OUTSIDE THE RAM CAP AND/OR THROUGH THE REIP
Filed by County of Hawaii with PUC, July 1, 2015 (excerpts)
...Hawaii County is concerned that the submitted proposals, especially the joint REIP (Renewable Energy Infrastructure Program), provide significant "end-runs" around the policies to review and control HECO's capital costs that the PUC has worked diligently to implement. The RAM (Revenue Adjustment Mechanism) Cap and REIP mechanisms provide additional means for HECO Companies to evade the PUC's intent, which is to carefully monitor and control additions to the HECO rate base....
County reiterates its support for the PUC's concerns and efforts as expressed in Order No. 32052 (April 28, 2014) ... :
...the nature of the electric utility business is evolving rapidly in light of technical, market and public policy changes that have and will continue to occur in Hawaii. The Commission observed that:
".. .the HECO Companies appear to lack movement to a sustainable business model to address technological advancements and increasing customer expectations. The commission observes that some mainland electric utilities have begun to define, articulate and implement the vision for the 'electric utility of the future.' Without such a long term, customer focused business strategy, it is difficult to ascertain whether HECO Companies' increasing capital investments are strategic investments or simply a series of unrelated capital projects to expand utility rate base and increase profits appearing to provide little or limited long term customer value."
The IRP Action Plan appeared to be, in part, a series of unrelated capital projects without strategic focus on the clear issues facing the utility, mid did not indicate further progress towards a sustainable business model. More recently, the HECO Companies' proposed 2014 capital expenditure program also appeared to be comprised of unrelated capital projects without strategic focus mid of questionable long-term customer value."
The REIP is particularly problematic. With passage of House Bill 623 and its signature by the Governor, Hawai'i State policy is now committed to 100% renewable energy by 2045. If not implemented with the highest level of concern for customer welfare and costs, the REIP and Bill 623 together deliver a "blank check" argument for HECO to justify practically any capital investment project on the grounds of meeting (or contributing to) Hawai'i's energy objectives, leaving the PUC as (potentially) the sole party to ask hard questions whether a proposed project is the most cost effective engineering solution available, and whether it fits into a comprehensive energy system design that is best for Hawai'i's people.
Without a thorough analysis of system design configurations and their associated costs to consumers performed by an objective, third party, the PUC will be essentially limited to options presented by the Utilities—with substantial pressure to approve whatever is proposed simply to meet the 100% renewables objectives.
This will place the PUC in an increasingly challenging role, given the political pressure that already exists and is expected to increase to approve renewable projects— often with little or no consideration by project proponents of cost implications for Hawai'i's hard-pressed citizens and ratepayers.
This is not an idle concern, as there is precedent for deeply flawed projects to be advanced in the name of meeting Hawai'i's renewable energy objectives.
For example, the Aina Koa Pono project was brought not just once, but twice, to the PUC for approval—with primary justification to meet the State's renewable energy objectives (in this case the project was a fuel purchase agreement from a third party for renewables-based biodiesel). This project was fatally flawed in every aspect, including: land, land use, feedstock, agronomic yield predictions, premature processes (not demonstrated at scale or length of operations), transportation impact on local roads, energy/mass balance, need for hydrogen to upgrade fuel energy content, irrelevant Life Cycle Analysis estimating carbon reductions, waste streams and environmental impact, oil price forecasts, and needlessly increased electricity prices imposed on Hawaii's longsuffering consumers. Inexplicably, the HECO companies promoted this fatally troubled project—twice—and were joined with support from the Consumer Advocate and (tangentially) DBEDT.
Fortunately for the citizens of Hawai'i, the PUC justifiably, wisely, and courageously resisted the pressure to move this project forward, and rejected it...twice. Were it not for the PUC, Hawai'i's citizens would now be facing higher costs from a project that should never have advanced beyond wishful thinking.
One can only imagine the pressure that will be placed on the PUC to approve a project, any project no matter how many inherent flaws, if it is claimed to move towards the State's goal of 100% renewable energy use.
There are numerous indications in the HECO/CA proposal that the REIP could be used to approve any project that can be shoe-homed into a definition of "renewable."
Page 4 (of the PDF) of HECO's June 15, 2015 independent proposal opens the door for REIP recovery for pretty much any project that uses or contributes to using renewably-based generation, with prejudice towards grid-connected projects:
"In the Joint Proposed Modified Renewable Energy Infrastructure Program Framework, the Consumer Advocate and the Companies have agreed that the scope of the REIP should be expanded to include projects that support incorporation of additional renewable energy on the grids or other undertakings of strategic importance to industry transformation."
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