Monday, May 16, 2011


Imagine buying goods with secret prices

By Henry Curtis

Imagine walking down the aisle of a food store and seeing no prices on any goods. Management tells you that they bargained with the food producers and only sell goods with low prices, until recently. Now they also sell premium goods. They also invest in some of the food companies and some of the former food store executives and directors have been hired to work for or serve as directors of the food companies. Would you feel you were getting a good deal?
That is what the electric company does. The price of all fuel they purchase for their own generators, and the price they pay for practically all independent power producers such as HPOWER and Puna Geothermal Ventures is Confidential Business Information. Recently the Public Utilities Commission agreed to let them pay premium prices for some goods that meet certain conditions.
HECO has established Renewable Hawai`i Inc., as an unregulated subsidiary to invest in independent energy companies that sell electricity to the utility. Former HECO executives and directors go to work for independent energy companies which then seek to sell electricity to HECO. All price negotiations are secret. The final price is secret. We pay the highest utility rates in the nation.

Life of the Land proposed making all of the prices public, after the Public Utilities Commission approved them. This would allow the utility to negotiate the best price and then allow us, the buyers of the electricity, to see how they did. Senator Baker introduced the bill (SB656). The Senate held a hearing on February 4, 2011 and sent the bill to the House on February 14, 2011, where it died, being unable to get a single hearing.

Meanwhile I spoke to PUC Chair Caliboso about it. He said it made sense and said the PUC could implement it without legislation.

Most testifiers at the Senate February 4 hearing supported the concept.
Indigenous Consultants, LLC: “When I tried to obtain the actual data relating to costs for Hawaii's electricity I was told that the negotiations, data, and justification for the extremely high rates charged were "proprietary" and "secret". In my estimation these monopolies have engaged in price fixing in violation of State and Federal law.”
Life of the Land: “Many people thought that rates would go down on Maui when the Keheawa Wind Farm was built. There are repeated rumors that Puna Geothermal Ventures has received a sweetheart deal whereby use of geothermal on the Big Island raises rates on an island that is leading the nation in high rates. Some people advocate allowing the utility to give a premium for biodiesel fuel made from Hawai`i crops. ...
Somewhere in history it was decided that the utility would get the best deal for ratepayers if potential renewable energy companies had no idea what rate the utility would agree to. Negotiations bogged down and many renewable energy companies left town. ...
Now the profitability of the utility is protected thru a decoupling mechanism, low rates are being encouraged through a PUC-approved Competitive Bidding process, and the State has adopted a policy that rapid conversion from fossil fuels to renewables is needed. The fastest way to get renewable energy companies to get involved is if they know what price they must meet. The fastest way to get community buy-in is if the community knows how much different renewables cost.”
Tawhiri Power LLC (TPL):  “TPL is an Independent Power Producer ("IPP") that owns and operates Pakini Nui Wind Farm located in the South Point Area on the Island of Hawaii. ... TPL supports this bill, but would request that language be added to the bill to state that the contracts for purchase of nonfossil fuel generated energy by a public utility will be published, in their entirety and shall include the purchase price of energy expressed as cost per kilowatt, on the Public Utilities Commission publicly-accessible portion of its website upon filing, as well as upon approval or determination by the Commission. This will provide true transparency.”
Robin Kaye: “I write this testimony in complete support of SB 656. I believe it is fundamental to our system of open government that the prices and all other relevant financial information relating to the purchase of renewable energy be publicly accessible. This information will play a major informative role in community discussions about our energy future; we as citizens will pay these prices and so they should be publicly available.”
DBEDT:  “The Department of Business, Economic Development, and Tourism (DBEDT) supports this bill and supports any opportunity to provide transparency regarding PUC-approved procurement contracts for the utilities' purchases of renewable energy generation. Providing this type of information to the public supports Hawaii's efforts to reduce its dependence on imported fossil fuels. DBEDT would like to suggest that ...the type of purchase power agreements disclosed to the public will only include PUC-approved contracts, to differentiate from contracts still under negotiation between the utility and the producer which may contain confidential information.”
 PUC:  “The Public Utilities Commission ("Commission") supports the intent of this bill, but notes that power purchase contracts may contain confidential and proprietary information that is provided to the Commission under protective order.”
Richard Ha (Member of the HCEl steering committee; Co chair of the geothermal working group authorized by SCR99): “I strongly support SB 656 Relating to the Public Utilities Committee. It is important that the public know the content of the contract as well as the costs that the energy utilities are paying for renewable energy. This will help to insure that the state has an effective energy policy. The present system makes it very difficult for the public to understand what is going on. It tends to perpetuate the chosen policy of the energy utility, which may or may not be in the public interest.”
HECO: “Certain material in support of the Contract approval, such as analyses of the reasonableness of the negotiated energy price may be submitted by the Hawaiian Electric Companies under protective order, primarily to maintain competitive pricing between developers negotiating Contracts with the electric company.”

One week later, on February 11, 2011 the PUC approved the contract between Maui Electric Company (MECO) and First Wind’s Kaheawa Power II, LLC. This contract covers the second wind farm at Kaheawa, mauka of Ma`alaea, Maui. The PUC requested that HECO reveal the prices that will be paid for the electricity.

HECO (March 17, 2011):  “The information related to MECO and Hawaiian Electric Company, Inc's ("Hawaiian Electric") negotiations with KWPII is deemed to be confidential. The pages identified as being confidential contains confidential negotiating positions, proposals, strategies, and/or technical and financial information. MECO/Hawaiian Electric and/or KWPII could be competitively disadvantaged in future power purchase negotiations if its confidential negotiating positions, proposals, strategies, and/or technical and financial information are disclosed to its competitors.”

There you have it. The utility is protecting us from seeing the prices we pay for the different sources of energy they use.

Earlier this year, almost simultaneously, they announced two items. The first got a lot of press, the second got very little press. They nickel and dimed the union in seeking the best deal management could get from the union. They votes to give their executives healthy pay raises, short and long term incentives, and various bonuses.

As Jay Fidell said yesterday  regarding HECO: “Father knows best.”

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Henry Curtis


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