Saturday, March 03, 2012
Is Avoided Cost to blame for high electric rates?
Synopsis: Utilities talk about energy prices but hide the data, making it impossible to verify whether public utilities are really concerned about the public or instead are more concerned about their bottom line.
"The next ones over are out major PPAs. And you'll see something in common with a number of them, and that's how much they look like each other. That is called "avoided cost contracting." And since the 1970s it has been a legal requirement with renewable energy that when we sign a contract with a renewable producer that they get paid whatever we have to pay for oil. So oil goes up their contract goes up; oil goes down their contract goes down--but it tracks oil. You'll see this particularly on the Big Island: it doesn't matter how much of that renewable energy I just showed you, it hasn't helped their bills there because almost everything on the Big Island is avoided cost contracting."
Henry, thank you for responding to my question. Also apologies for giving you the wrong video link. The correct video link is:
Question: Can you speculate *why* HECO EVP Robbie Alm disclosed HECO's (Oahu) cost structure back in May 2011 slide 3 (as demanded by SB656)?
Obviously if Alm could do it for HECO (Oahu), why not MECO (Maui) & HELCO (Big Island)?
Again, thank you for responding to my inquiry. :)
energy from renewables should be bought in such a way to allow renewables to compete meaningfully with oil by subsidizing start up costs if/when needed. all of that should be determined through PUC adjudication in the open, not privately between HECO and private proposed renewable energy businesses since the central feature of this scheme is public policy -- not HECO's or the rate payers' bottom lines.
Re *Avoided Cost* Contracting, Star Advertiser article "Geothermal gaining ground with public" (03-14-2012):
"The bulk of the geothermal energy produced at the [Puna Geothermal Ventures] plant -- about 25 megawatts -- is priced under an old "avoided cost" system in which HELCO pays PGV a price equivalent to what it pays to generate electricity by burning oil.
HELCO also pays avoided cost to independent power producers for electricity generated by a 10.5-megawatt wind project in Hawi and a 20.5-megawatt wind project at South Point."
Henry: It appears that Puna Geothermal Ventures and the Big Island's wind folks are making out like bandits under avoided cost contracting. For my historical edification what Hawaii Legislative Session bill phased out the avoided cost regime, and what was the public policy rationale (i.e., the "problem" it was designed to solve) for avoid cost contracting?
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