Gas, electric utilities differ on who will bring natural gas

Hawaii Gas, the state’s gas utility, and Hawaiian Electric Co., the power provider, are at odds over which of the two will be the main provider of liquefied natural gas for power generation in the state.

Most of Hawaii’s power plants use low-sulfur fuel oil, but HECO plans to shift them to liquefied natural gas, which can be cheaper and is considered a cleaner fuel.

On Tuesday Hawaii Gas said it was seeking offers from LNG bulk suppliers to provide the fuel for use in Hawaii. "We went to market for not only Hawaii Gas use of energy, (but also for) electrical generation, including the Hawaiian Electric companies," Joseph Boivin Jr., senior vice president of business development and corporate affairs at Hawaii Gas, said Wednesday in a telephone interview.

On Thursday, Hawaiian Electric issued a news release saying it is looking for its own partner to supply LNG and that Hawaii Gas spoke out of turn in saying it would provide gas for HECO.

"Although our fuel quantities were included in Hawaii Gas’ recent invitation to bid, Hawaii Gas did not consult with or ask Hawaiian Electric to participate," HECO spokesman Peter Rosegg said in the news release.

"We are in the final stage of selecting a company to supply natural gas for use in (our) electric generators," Hawaiian Electric said.

Rosegg said that Hawaiian Electric has been working with key stakeholders on developing an LNG plan that will help reduce energy costs. Those stakeholders include the Governor’s Office; Department of Business, Economic Development and Tourism; the Public Utilities Commission; and the Consumer Advocate, Boivin said.

Rosegg said that while Hawaii Gas and Hawaiian Electric have a memorandum of understanding to work together on a bulk delivery system for liquefied natural gas, the gas company did not contact the electric company before putting out a request for suppliers.

Furthermore, HECO said it will have the greatest buying power in the LNG market in Hawaii, and that it may make sense for Hawaii Gas to get its supply of LNG from HECO.

"The Hawaiian Electric companies’ requirement for natural gas represents more than 90 percent of total potential needs for the state of Hawaii. Our volumes will result in more favorable pricing levels that could then be available to other users, such as Hawaii Gas," Rosegg said.

Both utilities say they want to use the fuel to help supply low-cost energy to customers.

HECO will be moving forward with plans to import natural gas to lower customer bills as soon as possible, Rosegg said.

"Subject to approval from the PUC, we plan to start importing natural gas for electricity generation during 2017, taking advantage of this lower cost, cleaner fuel from North American sources to help reduce bills for our customers," Rosegg said.

Working with HECO, Hawaii Gas will try to supply LNG in bulk to Hawaii at the lowest possible cost, with the company’s bulk LNG supply and delivery put in place by late 2018 or 2019, said Boivin.

"From our standpoint we are going to continue to work under the spirit of the memorandum of understanding and continue to work with Hawaiian Electric, and I am sure NextEra," Boivin said.

NextEra Energy is a Juno Beach, Fla.-based clean energy company that recently agreed to purchase HECO’s parent company, Hawaiian Electric Industries.

Jim Robo, chairman and CEO of NextEra, said he hopes to convert HECO to LNG soon and use his company’s buying power in the natural-gas market to Hawaii’s benefit.

NextEra’s Florida utility uses natural gas for the majority, 70 percent, of its energy.

LNG was listed as one key point in HECO’s energy transition plan filed in August. The utility proposed to be LNG-capable by 2017.

The plan set goals of generating 65 percent of HECO’s power from renewable resources by 2030, tripling the amount of solar power and cutting the average bill for most customers by 20 percent.