I sent in testimony, on behalf of the Big Island Community Coalition, regarding HB 106, draft 1. This bill contemplates repealing Act 97 (geothermal subzones, etc.).
We should keep the good parts of this bill and add parts that make it better. We need balance as we take care of everyone’s needs. This is about all of us, not just a few of us.
Here’s my testimony:
To the Water & Land committee
Aloha Chair Evans and Vice Chair Lowen,
The BICC is very strongly in favor of amending this bill.
There are good things in this bill; let’s leverage that. We are strongly against repealing it in its entirety.
No question: home rule should be addressed. This was an unfortunate oversight the last time around. Let’s fix it.
The heart of the bill that must be kept is the part that allows geothermal exploration and development in various land use designations. The geothermal resource exists where it exists, not where we want it to exist. So we need a larger area to explore, not less. By having more choices we can get further away from populated areas. And we can increase our chances of success. The permitting process gives the necessary checks and balances to protect the people.
The essential problem we must solve is how to protect the people from rising oil prices. Repealing Act 97 in its entirety will raise our electricity prices.
The petroleum era is less than 150 years old. Oil is a finite resource and we are observing increasing oil prices. Oil price has quadrupled in the last 10 years. In contrast, the Big Island will be over the “hot spot” for 500,000 to a million years.
Geothermal-generated electricity is less than half the cost of oil-generated electricity. And it will be stable for 500,000 years.
The Big Island’s electricity costs have been 25 percent higher than O‘ahu’s for as long as anyone can remember. The Big Island Community Coalition is a grass roots organization that was formed to drive the cost of electricity on the Big Island down.
One of the BICC members did a cost analysis of a local school district’s 12 month electricity bills – generally 2012. Their costs (total of all schools involved) averaged $115,900/month.
At O‘ahu’s rates, those costs would be $115,900/1.25 = $92,700. That’s a savings of $23,200/month or $278,400/year.
If we figure $70,000/year pay for a teacher, the difference is four teachers for the district.
Because of these kinds of things, the BICC said enough was enough. People turned out at the PUC hearings, and consequently the governor issued a press release saying that HECO/HELCO had withdrawn its proposed 4.2 percent rate hike.
No one has ever told us: “We disagree with you; we want higher electricity rates.”
The members of the BICC are Dave DeLuz, Jr., John E.K. Dill, Rockne Freitas, Michelle Galimba, Richard Ha, Wallace Ishibashi, Ku‘ulei Kealoha Cooper, D. Noelani Kalipi, Ka‘iu Kimura, Robert Lindsey, H.M. “Monty” Richards, Marcia Sakai, Kumu Lehua Veincent and William Walter.
Rising electricity rates act like a regressive tax, but worse. As electricity prices rise, folks who can afford to get off the grid will do so. Those who cannot leave, the rubbah slippah folks, will be left to pay for the grid.
If we can achieve low-cost, stable electricity, trickle-up economics can result. If the rubbah slippah folks have money to spend, they will spend. Then businesses will be able to hire, and then we won’t have to send our children away to find jobs.
There is a lot at stake here.
Good luck.
Aloha,
Richard Ha
Cell 960-1057
I’ve been to five Association for the Study of Peak Oil conferences. I was co-chair of the Geothermal Working Group authorized by SCR99, and sit on the Hawaii Clean Energy Initiative (HCEI) steering committee and the State Board of Agriculture. I’ve been to Iceland to see geothermal in operation, and I was part of the Big Island delegation that toured geothermal resources in the Philippines.
At Hamakua Springs we farm 600 fee simple acres of diversified crops. I do an Ag and energy blog at hahaha.hamakuasprings.com.
I’ve found it takes about a month for me to assess what I learn at Association for the Study of Peak Oil (ASPO) conferences. And it’s been about a month now since I returned from the most recent conference, my fifth one.
As we start a new year, I can say that I am very optimistic about our prospects on the Big Island. Our new County Council is thinking about the whole island, not just East vs. West. The Big Island Community Coalition has shown that people can indeed draw a line in the sand and make a difference on electricity price issues.
This is truly about all of us; not just a few of us. Instead of focusing on the thousand reasons why “No can,” we need to form into communities of people who agree on the one reason why CAN:
For the greater good.
The U.S. shale, gas and oil boom will not last forever. But it does give us some time to position the Big Island to be a better place for future generations. It is about utilizing low cost options, and it is about taking care of our community. Doing these things will make all of us more prosperous.
Senator Dan Inouye had a direct influence on Hamakua Springs Country Farms, primarily through the Rural Economic Transition Assistance Hawaii (RETAH) program. That, in turn, allowed us to be part of the Big Island Community Coalition, where our mission is to achieve the lowest-cost electricity in the state.
We continue to follow Senator Inouye’s example: It is about all of us, not just a few of us.
Let me tell you a story. Nearly 18 years ago, C. Brewer Executive John Cross let me use 10 acres at Pepe‘ekeo, rent free, to test grow bananas. It was not clear then whether or not bananas could be successfully farmed in the deep soil and heavy rainfall of the Hilo Coast.
Having farmed bananas in the rocks of Kapoho and Kea‘au, I had no experience pulling a plow or getting stuck in mud. Until then, the standard way of planting bananas was by the “mat” system. The idea was to plant 250 plants per acre. Then, after the first bunch was harvested, you let four plants grow up, thereby increasing the population to 1000 plants per acre.
We decided to plant 25 percent fewer plants, in straight rows, so sunlight could hit the ground. The idea was to mow the grass in the
middle aisles in order to get traction instead of getting stuck in the mud. On that 10 acres, I mowed the grass and pulled a plow during the week to mark the lines. Then every weekend for several months, Grandma (who was 71), June, Tracy, Kimo and I, plus our two grandkids, would plant the banana plants from our own tissue culture lab.
(UH Hilo Professor Mike Tanabe taught us how to do that. And, by the way, instead of having a drop in production, the bunch size became larger, which made banana farming at Pepe‘ekeo more efficient.)
Kimo would carry a bucket of lime and dropped a handful as a marker every so many steps. Tracy or June drove the truck, and Kapono, who was around 6 years old, sat in the back and dropped a plant by the lime marker. Using picks and shovels, the rest of us set the plants in the ground. Even Kimberly, who was around 3, had a pick. She dug a hole wherever she wanted. After all the plants were planted, we took buckets and fertilized them.
At the end of that year, we felt it would work. We had a small ceremony where Doc Buyers, C. Brewer’s Chairman of the Board, cut off the first bunch of bananas. Also present were Jim Andrasick, who was then President of C. Brewer, and later Chairman of the Board of Matson; Willy Tallett, Senior Vice President of Real Estate/Corporate Development, and John Cross, who later became President of Mauna Kea Agribusiness (the successor company of C. Brewer).
C. Brewer had tens of thousands of acres and we had 10 acres – but our dreams were huge! We did not feel awkward that this group of heavy-duty corporate people were in attendance. We knew where we were going and it felt very appropriate for them to be there.
Then, a few years later, Senator Inouye, the leader of the Democratic party, appointed Monty Richards, a staunch Republican, to administer the RETAH program. That helped us expand our production at a critical time. And again Senator Inouye demonstrated that it wasn’t about a few of us, but it was about all of us.
We are only one of the tens of thousands of people who were helped by Senator Inouye.
At this special time of year, we look back at times and people from long ago and we smile. We thank everyone who has helped us along the way.
If we can continue to grow food, and if we can help our workers have a better life for their children, those are our goals.
Dr. Jim Kennedy, a friend of mine, is a respected member of the astronomy community and a tireless supoorter of the community at large. Below is the testimony he sent to the PUC.
More PUC testimony from a Big Island resident opposing the Aina Koa Pono biofuels project and the proposed 4.2 percent HECO rate increase.
See below where he charted the price of crude oil over the past two years, as well as how much his HELCO bill increased over the same period of time, and didn’t find much correlation.
Dear Chair Morita & Commissioners:
I want to express my most sincere opposition both to the Aina Koa Pono Biofuel project and the Helco 4.2% rate hike.
In today’s day and age it is inconceivable that while we are living in one of the most privileged locations on the planet with regards to renewable energy resources availability we still depend on a single utility company that holds a true monopoly on the power generation and that continues to ignore what would be the most efficient path towards energy independence.
South Puna seats on a rich geothermal zone that could provide enough power for the entire Big Island. South Kona & Kohala areas have enough sun radiation to produce a significant supplement to the grid, and South Point and Saddle Road areas provide some of the most reliable wind patterns for wind generation. Yet, here we are debating on whether we should lock in a $200/barrel deal with a biofuel company. Who in its right mind would opt for this option!?
As for the rate hike, the following graph shows my cost per kWh at my home for the past two year (since Jan 2010)
As you can see from the graph, my price has increased from $0.36/kWh to $0.42/kWh, that is a 16.7% increase in just two years. Now they want an additional 4% increase? under what justification? meanwhile, HELCO continues to report record profits year after year.
Notice any discrepancy between the two graphs? In Jan 2010 the price per barrel of crude oil was $82.00, in November 2012 the price is $87.50 an increase of 6.7%. Helco has increased their rates 2.5 times the net increase of the price of oil, and now they want another increase.
For example, the ads say HECO has increased geothermal energy on the Big Island by 25 percent. That sounds wonderful – but that is from a base of only 30 MW. It also says that Aina Koa Pono will only result in $1 per month difference to a typical rate payer.
The big picture is that HECO has resisted closing down its oil-fired plants for years. But now, people are saying enough is enough.
Here is another concerned community member’s testimony against Aina Koa Pono and the proposed 4.2 percent rate increase. Send yours to hawaii.puc@hawaii.gov by tomorrow.
To: ‘Hawaii.PUC@hawaii.gov’
Subject: Dockets Docket # 2012-0185 & 2012-0099
Aloha Chair Morita and commissioners:
I am strongly against the AKP biofuel supply contract and the increase in the Helco electricity rates.
I have lived here on the Big Island in Puna, close to Pahoa for the last 14 years and am the owner of a bed & breakfast operation in Leilani Estates. I have a family with two children and two acres of property. If any of the two dockets go through it will increase the cost of doing business for me and infringe on the viability of my operation. The nature of my business requires for electricity to be available to our guests and there are many times, when I cannot control the use of it, because guests staying at my B&B may not be as conscientious in preserving energy as I am: fans, lights, radios or TVs are left on even though the visitors are not in their rooms. In order to cover additional operational cost my only option would be to increase our B&B rates, however, with the current economy this will result in a decrease of bookings, as people traveling always look for bargains and are not willing to pay higher accommodation rates, if they can get a “beat-the-price” online offer for some of the hotels as package deal with much better conditions.
On the Big Island, electricity rates have been 25 percent higher than Oahu’s rate for as long as people can remember. It has contributed to the Big Island having one of the lowest median family incomes in the state and the attendant social problems that come with a struggling economy. As a family this affects our children and the way we are able to give back into the economy and our communities.
Rising electricity rates act like a regressive tax – people at the bottom of the economic ladder suffer the most. But it is worse; as electricity prices rise, folks that can afford to leave the grid will do so, leaving the folks unable to leave to assume more of the grid infrastructure cost. It is a catch 22. For me with my business depending on consistent electricity supply, it would be impossible to leave the grid and I would be directly impacted by the increased rates and future consumer decisions.
1. Aina Koa Pono Biofuel Project – Docket 2012-0185: Rate payers will subsidize the difference between the actual oil price and the $200 that AKP will be guaranteed for 20 years. It is more than possible that actual oil prices would be substantially below $200 for the whole contract period. That will result in a heavy subsidy that rate payers must bear. The $200 per barrel rate is much too high. And the cost differential that is anticipated to be passed through to the rate payer is unconscionable. The PUC should not approve as just and reasonable that the utility should be allowed to establish a Biofuel Surcharge provision that will allow the pass through of the cost differential to the consumer as well as the actual cost pass through itself.
2. HELCO Rate Increase – Docket 2012-0099: HELCO states in its full page newspaper advertisement that only 3% of its revenue goes to profits. In 2011 HELCO reported $138.2 million in net earnings. Most small businesses in Hawaii do not have a 3% profit margin, most net earnings are much lower and that includes my Bed & Breakfast business. Increased electricity rates would narrow this margin even more. I am entirely opposed to an increase in electricity rates. As a business owner it is HELCO’s responsibility to keep the grid in operating condition. This is not the responsibility of the end users nor should we be charged for it. It is a crucial part of the operating expenses and investments in the future, that a business has to strategically make. It is the same for my business, if I let my rooms fall into disrepair or do not invest in new mattresses every few years, people will stop coming. It is in my best interest to make these investments as I am wanting to stay in business. It is the same for a utility company. Not all investments can be directly compensated by increased rates. The market and consumers will only bare so much – and as consumers, we are saying – no more! Profits will go up and down, depending on what investments have to be made – and that is true for all businesses. But as a business owner we all know that these investments are long term and also mean decreases in the company’s corporate taxes. Also, how much do you think the HELCO advertising campaign costs? Without knowing exact figures I am sure it is in the millions. As end consumers, we are paying for that, too! What a waste of good money…
You can send an email opposing this project. Email it by this Friday, November 30, 2012, to hawaii.puc@hawaii.gov.
To: hawaii.puc@hawaii.gov Subject: AINA KOA PONO CONTRACT
Please consider my testimony on : DOCKET # 2012-0185 (Aina Koa Pono supply Contract)
AINA KOA PONO, LLC Docket # 2012-0185
In this docket, HELCO is asking you to validate its proposed contract with AKP, passing on the expected additional cost of the project in the form of a surcharge to rate payers on both Oahu and the Island of Hawaii.
It is difficult, sometimes, to imagine a decision of this nature on the basis of the economics of the case itself.
To help us with this, AKP’s PR firm has reduced the numbers to minimize the apparent impact of the decision – simply add $1 per month to your power bill for 20 years or a total of $240. Seems pretty small, not much of a decision or even much of a risk when put in these terms. Of course this picture does not paint the costs as they apply to thousands of businesses, non profits, government entities or other organizations. Neither does this demonstrate how those costs ripple through the economy to increase costs of goods and services while reducing the supply of the same. So, lets look at this from three other perspectives before we get further into the discussion. Those three perspectives are of a family barely making ends meeting (and actually not making it accept with government and family help); a family that makes ends meet but with some sacrifices and finally a family that has plentiful resources and buys whatever luxuries they desire. But lets change the terms – to the cost of fuel for these three families.
•Ask yourself, if you were the first family if someone offered to sell you gas for the next 20 years – starting in 2015 at twice today’s average rate or about $8/gallon and at today’s usage – would you buy this package? Probably not – they are not assured that gas will cost $8/gallon over that period and can see that rather than trade a known (but apparently very high) cost of fuel they would anticipate that they would make yet more lifestyle changes. They would increase car pooling, bus riding, volume grocery buying (if possible), growing more of their own food, etc. THE POINT IS that they truly cannot and would not be able to afford the higher costs and so would take other steps to make ends meet. In the same way, to families at the bottom of the economic ladder the AKP deal is something that they cannot afford and never would select.
•If you were in the second group the situation may present itself differently, but in this case you may have more options. For instance, rather than locking into $8/gallon and at today’s usage you may decide to buy a more fuel efficient car; combine trips; consider other transportation (bikes, walking, carpooling, bus trips, etc.) reducing steps. The point is that you would have more means of reducing usage so that the $8/gallon could take you further. It is not likely that you would take the deal as presented. You have too many assured usage reducing options and too little assurance that the price will actually reach $8/gallon.
•If you were in the third group you still might not buy into the proposition. Your ability to purchase more efficient transportation -or even ignore the problem because fuel may not reach that level – is greater, the impact less.
So then, the point is that very few would even consider the option being proposed by AKP if it were put to them in terms that they work with every day. Neither should the PUC.
These scenarios may have little impact on your decision, after all your decision is really on a macro level dealing with a large company, sophisticated planning and island wide demand. For this I ask you to consider the following:
IS THE PROPOSITION REASONABLE AND IN THE PUBLIC INTEREST:
•If there are other alternatives for providing power to the Island of Hawaii that are or are likely to be less expensive then the answer is clearly “no.” Why pay more to achieve the same result (power generation) when less expensive sources are or can with a similar degree of confidence be expected to be available. So the question, then, is – are there?
• AKP’s contract appears to call for fuel at $200/barrel vs. today’s rate that bounces somewhere between $80 and $120 (but generally near the mid point – $100).
• PGV is able to produce power at the equivalent of $57/barrel – 28.5% of the cost of AKP’s proposal. This is produced with reliable and proven technology here on the island of Hawaii. it produces less carbon in the process and is a known quantity.
• LNG is proposed as a possible alternative, In fact we are told that many mainland power producers are turning to this source from coal and petroleum products. They do so because of efficiencies and reduced dependance on foreign sources. Would it not make more sense to at least wait to see what studies show the impact of LNG would be on our power costs before committing to a 20 year contract based on much higher prices?
• Ho Honua proposes to sell to HELCO at market rates. Others are taking similar risks to produce fuel at market rates – whatever they may be – even at today’s rates (i.e. Big Island Bio-Diesel).
• Other technologies are coming on stream that promise reduced power generation costs as well – solar energy or various types, bio-fuels from algae, wave action, etc. Why lock in a supplier whose promise is similar fuel but at higher prices.
•HELCO/AKP counter that if the fuel does not end up being economical – they can sell it to transportation or to other islands for their power generation. But that assumption is based on the AKP created fuel being less expensive than fuels from other sources. If it is not – then HELCO sells those fuels at a loss which the rate payer must subsidize. In short – the risk remains
•This proposal is truly a gamble not simply on the cost of fuel over the proposed period (2015 – 2034) but on the cost of alternative fuels, alternative sources of power and even over whether the target plant (Keahole) will be economically viable throughout this period. We would ask: WHAT MITIGATING FACTORS WOULD DRIVE US TO MAKE THIS GAMBLE – particularly as we consider the impact on the lives of our residents and their businesses.
WHAT QUANTITATIVE OR QUALITATIVE VALUES SHOULD BE ASSIGNED TO SUCH A PRICE PREMIUM OR EXTERNALITIES
•This is a vital question. It needs to be evaluated in its full context which includes: individuals at the lower end of the scale who cannot make ends meet today; businesses that will have to increase prices further and reduce product and service offerings further; individuals and businesses who are trying to compete with Oahu and other locations with lower power costs; companies that are evaluating the Island of Hawaii as a location but must take into account the already unusually high cost of power here as one of the deciding factors.
• The end is that many will find that their survival at any reasonable level does not allow for such luxuries as taking the risks this contract proposes. These externalities for those who struggle are too high to pay and not worth the risk.
• For those who may point out jobs to be created in the production of these fuels do not account for the jobs lost throughout the island because of the additional costs of the AKP premium and there surely will be many.
WHAT RATE PAYER RISKS SHOULD THE COMMISSION CONSIDER IN EVALUATING THE BIODIESEL SUPPLY CONTRACT?
•The risk that the market price for fuel will not in the end justify this ($220/barrel) cost
•The risk that other power sources can be developed that will be less costly
•The risk that at each level higher those able to depart from the “grid” do depart from the grid making the remaining – less and less economically capable – rate payers pay a higher and higher proportion of the distribution and generation costs. (This thing steamrolls literally).
HOW ELSE MIGHT THE COMMISSION AND HELCO PROVIDE FUEL TO KEAHOLE
•Dr. Schumpeter more than four generations ago pointed out that market systems need to encourage “creative destruction.” By this he meant that ever more efficient technologies by their nature create higher living standards while making obsolete the technologies that they replace.
This applies as follows: WHEN KEAHOLE is no longer economically viable – it needs to simply cease to operate. This is fundamentally an owner (i.e. stockholder) risk and should not remain a risk of the populace as a whole. We should not be taking extraordinary steps to keep in operation a plant that may have become functionally and technologically obsolete. Whereas there may have been a time when ensuring the viability of the assets of a controlled monopoly made sense – they no longer do.
What happened in the communications industry (i.e. cell phones vs. land line phones) will and is happening in the power generation industry. The PUC must recognize this change or the number of “well healed” customers who depart the grid will overwhelm the entire system leaving only those least able to pay on the grid having to pay for an overwhelmingly burdensome grid.
•There is, nonetheless, more than one answer to this question and arguably all of the other options are less expensive and certainly less economically risky. Keahole may be converted to operate on LNG. AKP is essentially a hedge bet – it may well be that continuing to purchase fuel on the market (whether from local sources, or other sources) will be a less expensive option. We do not know at the moment which it will be, so should we be taking this hedging risk?
OTHER CONSIDERATIONS
•AKP is essentially a complex set of transactions designed to allow HELCO/HECO to meet the State’s goal of reducing dependance on foreign fuel sources while keeping alive Keahole and increasing spot employment among other benefits. This particular scheme appears to have many benefits but at no small risk. At its heart are assumptions about the future price of oil, the capabilities of technologies untested at anywhere near the size and configuration proposed. The commission must ask itself: IS IT APPROPRIATE to ask rate payers – many of whom are at the extreme low end of the economic scale – to participate in the risk? If the answer was that there are really no other viable options the answer may be clearly and easily “yes.” But this is not the reality – there are many other alternatives and most of them at significantly lower cost. Justification for this risk taking is, in fact, scant.
•In the 1970’s the Northwest Utilities made a series of judgements based on expected power requirements and power prices. Prices assumptions were driven at that point by dramatic increases in the price of fuel and by its apparent (but not actual) scarcity. Demand was based on charts showing post WWII growth and regional growth based on increasing industrialization of the area resulting from low power prices would continue on the same upwards trendline. These factors led WPPSS to develop a complex funding scheme to build nuclear power plants. All of this was well meaning and well intentioned. The coming debacle – a $2.25 Billion default – is a classic example of what happens when we add uncalled for complexity based on a future that is much more nuanced than any chart can demonstrate. (One summary of the adventure can be found at http://columbia.washingtonhistory.org/anthology/maturingstate/seduced.aspx) Frankly, although similarly well intentioned and actually less complex – the driving factors for AKP share several of the same characteristics. For a community that is paying 4X the national average for power, 25% more than Oahu for power – this is a risk that a fragile economy simply cannot bear and should not be asked to bear.
Regarding the Aina Koa Pono (AKP) biofuel project, and despite its full-page newspaper ads, Hawaii Electric Light Company (HECO) has clearly shown that it does not have the public interest at heart.
The utility kept secret how much AKP would be paid – $200 per barrel – and manipulated that information to estimate that the average rate payer would pay $1 per month and make us feel like this was a small thing.
This is grossly unfair. There are many different ways HECO could have informed the public without compromising proprietary information. Instead, behind our backs, it was applying to pass through the cost of $200 per barrel oil.
It’s unconscionable to do this to the “rubbah slippah” folks.
Now, week after week, HECO continues to run its full page newspaper ads to wash our brains and tell us how much it is trying to lower our rates. Hmmmm.
This Friday, November 30, 2012, is the deadline to submit testimony to the PUC opposing the Aina Koa Pono project.
Email your letter to: hawaii.puc@hawaii.gov and reference this in the subject line: PUC Docket #2012-0185; Application for approval of biofuel supply contract with Aina Koa Pono.
Here’s the testimony I sent:
To: PUC <hawaii.puc@hawaii.gov> Subject: PUC Docket #2012-0185; Application for approval of biofuel supply contract with Aina Koa Pono
Aloha Chair Morita and commissioners:
I am strongly against the AKP biofuel supply contract.
I am president of Hamakua Springs Country Farms, which is a family farming operation. We farm 600 fee simple acres of bananas and tomatoes at Pepe‘ekeo on the Big Island. We have more than 35 years of farming experience. I am a committee member of the Hawaii Clean Energy Steering Committee. I was co-chair of the Geothermal Working Group. I have attended four Association for the Study of Peak Oil conferences, so I have a fair understanding of energy issues.
My testimony relates to the effect that the AKP biofuel contract will have on my workers and on my farm, as well as on food security in general and the Big Island’s economy in particular.
The AKP/HECO fueling arrangement contemplates AKP being paid approximately $200 per barrel of biofuel. The $200 per barrel payment to AKP will begin in 2015, when AKP is anticipated to deliver the specified quality fuel. The contract will then last for 20 years. HECO points out that the rate subsidy will only begin when AKP delivers fuel, as if to say that there will be minimum economic effect on rate payers. Nothing could be further from the truth.
The AKP fuel purchase contract of 20 years precludes utilizing potentially lower cost alternatives. Geothermal, for example, is 11 cents per kilowatt hour less than oil for generating electricity. If geothermal were used instead of oil at the 60 MW Keahole plant, it would save $58 million annually compared to oil at today’s price. And oil today is nearly half the cost of AKP’s fuel oil at $200 per barrel.
It appears that the AKP contract tracks the AEO 2012 high price scenario instead of the reference case scenario. During the last few years, knowledgeable commentators such as Jeff Rubin point out that rising demand and rising oil prices contains the seed of its own destruction. The last four recessions, dating back to 1970, indicate that oil price spikes cause recessions. And recessions cause oil prices to fall back. Global economic growth is grinding to a halt when oil is close to $100 per barrel. So it is more prudent to follow the reference case of the EIA’s AEO 2012 oil price projection – instead of the high rate case oil price path that HECO chose.
The PUC should not approve as just and reasonable that the utility should be allowed to establish a Biofuel Surcharge provision that will allow the pass through of the cost differential to the consumer as well as the actual cost pass through itself.
Rate payers will subsidize the difference between the actual oil price and the $200 that AKP will be guaranteed for 20 years. It is more than possible that actual oil prices would be substantially below $200 for the whole contract period. That will result in a heavy subsidy that rate payers must bear. The $200 per barrel rate is much too high. And the cost differential that is anticipated to be passed through to the rate payer is unconscionable.
On the Big Island, electricity rates have been 25 percent higher than Oahu’s rate for as long as people can remember. It has contributed to the Big Island having one of the lowest median family incomes in the state and the attendant social problems that come with a struggling economy.
Rising electricity rates act like a regressive tax – the folks on the lowest rungs of the economic ladder suffer the most. But it is worse; as electricity prices rise, folks that can afford to leave the grid will do so, leaving the folks unable to leave to assume more of the grid infrastructure cost.
Oil price has quadrupled in the last ten years. People and businesses have made necessary adjustments, but there is just no more to cut. Farmers have cut back on employee benefits, and they have cut back on capital improvements to survive. But this is false economy; sooner or later, maintenance foregone will catch up. Farmers are especially vulnerable because they are price takers rather than price makers. It is our food security that is at stake.
Hawaiian farmers’ and food manufacturers’ main competition is U.S. mainland producers. Oil costs make up less than 2 percent of the electricity costs on the mainland. Oil is more than 70 percent of the cost of electricity in Hawa‘ii. Any mainland food product that has substantial cheap electricity costs imbedded in it becomes relatively more competitive to Hawai‘i products as oil prices rise. AKP’s price subsidy will make Hawai‘i food producers even less competitive to their mainland counterparts. Allowing cost differential pass through will threaten our food security.
Higher electricity costs from the AKP project will affect fresh food costs. Farmers, wholesalers and customers of locally gown food all pay for the electricity that it takes to maintain the “cold chain.” That raises food cost and takes away discretionary income from consumers. Consumer spending makes up two thirds of our economy. Allowing cost differential pass through threatens our economy.
Rising electricity rates act like a regressive tax – the folks on the lowest rungs of the economic ladder suffer the most. But it is worse: As electricity prices rise, folks that can afford to leave the grid will do so. This leaves the folks unable to leave to assume more of the grid infrastructure cost. These are the very people who are most affected by rising electricity rates. Allowing cost differential pass through is not in the public interest.
In this particular project, HECO has shown that it does not have the public interest at heart. Worse, it kept secret the $200 per barrel amount that AKP would be paid and then manipulated that information to come up with an estimate of $1 per month for the average rate payer. That was grossly unfair. Passing on the high biofuel cost to the rubbah slippah folks while making it seem that there would hardly be an effect is unconscionable. There were many different ways they could have informed the public without compromising proprietary information. Instead they chose this way. It speaks for itself.
Big Island Mayor Billy Kenoi has consistently made the point that in this changing world, we, too, must change. He pointed that out again recently: That our highest-in-the-nation electricity cost – which is 25 percent higher than O‘ahu’s – is too heavy a burden for the Big Island’s people to bear. To help the most defenseless among us, as well as our local businesses, we need lower cost renewable electricity; not higher cost electricity.
The mayor has consistently been in favor of finding lower cost alternatives to the status quo (which is, of course, dependency on
expensive fossil fuels). The Geothermal Working Group, co chaired by Wally Ishibashi and me and authorized by the Hawai‘i State Legislature, could not have carried out its work without the mayor’s backing. It was an unfunded mandate implemented by volunteers. The mayor just told his people, “Make sure they have what they need.”
Mayor Kenoi is a quick learner; one who gets both the big picture and the small one.
He led a delegation to Ormoc City, Philippines to see how 700 MW of geothermal energy was developed in a place with a population size similar to the Big Island. I was on that trip and saw how the Philippines is way ahead of us in assessing and utilizing its resource. It’s a great credit to Filipino leaders that, as the Philippines incorporates more geothermal into its grid, the country will be very well-positioned to cope in a world of rising oil
prices.
The Philippines produces a large percentage of the food its people eat, too, as compared to Hawai‘i. Our trip also resulted in a university-to-university relationship.
It’s not that geothermal is the only solution. But because we have geothermal here on the Big Island, that fact-finding trip was a responsible thing to do. That was a very practical, useful and cost effective trip Billy led.
Sitting in the middle of the Pacific Ocean, Hawai‘i is vulnerable to events out of its control, and is sailing into uncharted waters. It’s similar to when our early predecessors sailed up from the south to find a better life.
Who can I see leading today’s expedition that carries the Big Island to a better tomorrow?
