Hawaiian Electric Co. announced Thursday it has been awarded a $638.5 million contract to own, operate and maintain the electrical distribution system for the Army’s 12 installations on Oahu.
The move follows a privatization trend for military day-to-day operations while the Defense Department also pursues electricity-generating microgrids for times of emergency.
The 50-year deal includes Schofield Barracks, Wheeler Army Airfield, Tripler Army Medical Center, Fort Shafter and Army housing areas.
HECO said it was one of several bidders for the project following a competitive process that began in 2016.
“We made the case that we could deliver a cost-effective, long-term solution for the Army,” Alan Oshima, HECO’s president and CEO, said in a release. “I’m proud that a Hawaii-based company was selected to provide these vital services and we look forward to being a trusted energy partner to the Army and to thousands of military service members for decades to come.”
U.S. Army Garrison Hawaii said the Defense Logistics Agency Energy office on the East Coast would have to be contacted for information on other bidders.
The effort supports the Army’s
Utilities Privatization program, an Army-wide effort to upgrade and sustain utilities more efficiently and economically. As of late 2018, the Army said, 152 of its 356 U.S. electrical, gas, water and wastewater systems had been privatized, saving $3.4 billion compared with continued Army ownership.
HECO provides electricity to the Army, which in turn distributes the electricity to its facilities and bills its users.
“The Army needs secure, reliable energy to do our mission, and that’s what this effort is all about,” said Col. Tom Barrett, commander of U.S. Army Garrison Hawaii. “Privatizing the Army’s electrical system on Oahu supports energy resilience, and energy resilience is critical to Army readiness.”
As part of the contract, HECO agreed to perform Army-identified capital improvements and to replace aging distribution infrastructure.
A preliminary assessment estimated upgrade needs of approximately $40 million in the first six years of the contract, HECO spokeswoman Shannon Tangonan said.
In addition to its regular monthly electricity bill, the Army will pay HECO a monthly utility services charge to cover operations and maintenance expenses, and provide recovery for capital upgrades, capital replacements and the existing distribution system based on a rate of return determined by the Public Utilities Commission, Tangonan said.
The contract requires PUC approval. HECO plans to file an application for approval within 30 days.
HECO said if regulatory approval is received next year, it and the Army have agreed to a one-year transition period, with the takeover of the system in late 2021.
Under the agreement, HECO will be responsible for the Army electrical distribution system from transformers and power lines to trouble-shooting calls from customers.
Part of that work is currently done by four electricians capable of working on high-voltage systems who are on the U.S. Army Garrison Hawaii staff and will remain on staff and perform nonprivatized functions, the Army said.
The move follows the Military Housing Privatization Initiative of 1996, through which 99% of military installation housing has been privatized across the United States, with more than 80 projects in place.
Before privatization the military had a $20 billion housing maintenance backlog that was expected to take 30 years to address using traditional military construction.
In May 2018, HECO and the Army held a dedication for the $148 million Schofield Generating Station, a 50-megawatt facility on base that runs on biofuel and conventional fuel and was designed to feed into HECO’s grid to serve all customers on Oahu.
It is the only power plant on Oahu located inland — away from the potential damage of sea storms, tsunamis and rising sea levels, HECO noted.
In an emergency, the plant owned and operated by HECO can serve as an energy island or microgrid that feeds power exclusively to Schofield, Wheeler and Field Station Kunia, the Army said.
The Hawaii Technology Development Corp., a state agency, announced in May that an $8.3 million contract was awarded for the first in a series of microgrids — which can operate in tandem or independently from the main power grid — at Joint Base Pearl Harbor-Hickam to demonstrate the reliability and resilience of renewable energy.
The Defense Department also pursued a microgrid project called SPIDERS — Smart Power Infrastructure Demonstration for Energy Reliability and Security — at the joint base and at Camp H.M. Smith, where U.S. Indo-Pacific Command headquarters is located.
The Camp Smith project — the Defense Department’s first installation-wide microgrid — was intended to demonstrate power resilience during cyberattacks. Both projects experienced operations and maintenance challenges.
