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HECO revises its plan to buy biofuel

Customers would be hit with a surcharge, as the green energy is pricier than diesel

By Alan Yonan Jr.

LAST UPDATED: 1:53 a.m. HST, Oct 29, 2012

The public will have the opportunity this week to speak out on a revised plan by Hawaiian Electric Co. to buy locally produced biofuel for power generation after its initial proposal was rejected as being too costly for ratepayers.

HECO and its Hawaiian Electric Light Co. subsidiary on Hawaii island are seeking approval from the Public Utilities Commission to buy 16 million gallons of liquid biofuel fuel per year for 20 years from Aina Koa Pono LLC at a fixed price. The biofuel would be used to replace the diesel HELCO burns at its 81-megawatt Kea­hole power plant.

Although HECO officials did not disclose the price of the biofuel, they said the cost would be $125 million less over the life of the contract than Aina Koa Pono originally proposed. The PUC denied that plan in September 2011, saying the contract price was excessive and not in the public interest.

But even at the new, lower price, the biofuel would be more expensive than diesel, requiring the utilities to impose a surcharge on ratepayers to make up the difference.

If spread across ratepayers on Hawaii island and Oahu, the surcharge would be an estimated 84 cents to $1 per month for a typical family using 500 to 600 kilowatt-hours of electricity per month, according to HECO. However, the utilities are projecting that the situation will reverse itself over time as the price of oil rises and the price of biofuel holds steady. That would eventually reduce the relative cost of biofuel-generated electricity, which could potentially save ratepayers $500 million over the life of the fuel contract, according to HECO.

The utility said its projections are based on the assumption that oil will follow the "high price forecast" published by the federal Energy Information Administration in its Annual Energy Outlook. In the 2012 outlook the EIA's high estimate was that oil would reach $200 a barrel by 2035. Its midrange estimate was $145 a barrel, and its low estimate was $62 a barrel. By using the high estimate, HECO was able to achieve a more favorable price comparison for biofuel.


The Public Utilities Commission will hold public hearings on Hawaii island and Oahu this week on whether Hawaii Electric Light Co. and Hawaiian Electric Co. should be allowed to impose a surcharge on ratepayers to cover the cost of buying biofuel for electricity generation.

>> Monday, 6 p.m., Hilo High School Cafeteria, 556 Waianuenue Ave.
>> Tuesday, 6 p.m., Kealakehe High School Cafeteria, 74-5000 Puohulihuli St.
>> Thursday, 6 p.m., Farrington High School Cafeteria, 1564 N. King St.

The proposed biofuel surcharge is a sore point for many Hawaii island residents and businesses given the island's high electricity prices and the fact that HELCO recently filed for a 4.2 percent rate hike, said Wallace Ishi­ba­shi, a member of the Big Island Community Coalition, a group formed in August to push for lower electricity rates on Hawaii island. HELCO residential customers paid 40.4 cents a kilowatt-hour for electricity in October, second only to the 44.9 cents per kilowatt-hour paid on Kauai.

"We oppose any rate increase. Enough is enough," Ishi­ba­shi said. "A lot of people are having to turn off the lights because they can't afford it. When companies have to pay more for electricity, they have to cut workers' pay and benefits," said Ishi­ba­shi, Hawaii island's division director for ILWU local 142.

Ishibashi said members of the Big Island Community Coalition attending a PUC hearing today at Hilo High School plan to wear rubber slippers to symbolize the solidarity of HELCO customers in the face of rising rates. The organization also will pass out 500 buttons that read "No Rate Hike," he said.

PUC hearings also are scheduled for Tuesday in Kona and Thursday in Hono­lulu.

Aina Koa Pono said it plans to spend $450 million to build a biofuel processing facility in Pahala. The operation initially would use invasive plant species, macadamia nut husks and coffee hulls as a feedstock. The company would later grow noninvasive perennial crops such as sweet sorghum and nonseeding Napier grass. Company officials said they plan to use a process called microwave catalytic depolymerization to convert organic material into a liquid fuel.

HECO said biofuel is a significant part of its strategy to reduce the company's reliance on fossil fuels for electricity generation. The utility is required by law to have 40 percent its electricity sales come from renewable sources by 2030.

"Across the islands we have power plants using black liquid fuel — oil — to generate electricity. We have done tests and found that green liquid fuel — biofuel — can be used in those same generators with very small modifications," said Peter Rosegg, a HECO spokes­man. "So we can continue to use the existing power plants — which we have paid millions of dollars to build, maintain and upgrade — as we transition to other renewables," Rosegg said.

One advantage biofuel has over other forms of renewable energy is that it provides firm power, meaning it can be used to back up intermittent energy sources such as wind and solar, he said. Biofuel also can be produced locally and burns cleaner than petroleum-based fuels, Rosegg added.

"We believe biofuels will be cheaper than oil during the lifetime of the contracts we are signing. Also, because we can sign long-term fixed-price contracts for local biofuel, we can avoid some of the volatility in energy prices that are attached to burning oil," he said.

Henry Curtis, executive director of the nonprofit environmental and community action group Life of the Land, said he has numerous concerns about the proposed biofuel plan.

Among other things, HECO did not explain in its PUC filing how the proposed biofuel plant would fit in with other large-scale alternative energy proposals on Hawaii island, including a plan to generate electricity by burning eucalyptus chips and another to expand the capacity of the Puna Geothermal Ventures power plant.

"Right now the Big Island has more generating capacity than they need, and they're talking about adding biomass and biofuel. What are the price points for all these? The ratepayers need to know so they have an idea what they're paying for," Curtis said.

The PUC granted Life of the Land intervenor status in the Aina Koa Pono case, which will give Curtis access to information in the decision-making process that is not available to the general public.

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