Saturday, March 03, 2012


Why is my electric bill so high?

By Henry Curtis

Synopsis: In the past five years there have been no price analyses for different present and future electricity scenarios conducted by or for  HECO, DBEDT or the  PUC. 

Why is my electric bill so high? Hawai`i now has large wind farms at South Point, Hawi, Kaheawa, and Kahuku. Why didn’t prices go down if we have renewable energy? What’s going on? 

Robbie Alm and Jade Moon have these TV ads that say it’s not HECO's fault. If it is not HECO's fault, then who is to blame?

It has been known for a half millennium that an economy that is absolutely dependent upon one import, does well when the price is low and suffers when the price is high.

So we could argue that we are suffering since the price of oil is high. 

This is unique to Hawai`i. We use oil for 80% of our electricity, down from 95% a few decades ago, while mainland utilities use oil for less than 2% of their electricity.

We could argue that way. Or blame the solar industry, the wind industry, or long-term fossil fuel power purchase contracts that are pegged at a high cost per kilowatt-hour. Or blame it on poorly understood terms such as avoided cost. But where is the data? Where is the analysis?

Suppose you wanted to know what share of your electric bill covers generation, transmission, distribution, meter reading, customer service, administrative and profit. The utility will not provide that data, even if you sign a protective order swearing never to release the data.

HECO has a number of power plants. Each require a different amount of oil to produce one unit of electricity. Thus the costs to produce electricity varies from generator to generator. To calculate the different costs depends upon some technical issues, but trying to get that information under protective order is like trying to pull teeth out of a shark. The utility does not want to release this critical information, even to the Hawaii Public Utilities Commission (PUC) created Reliability Standards Working Group on which I serve.

HECO’s traditional arguments to the PUC  Reliability Standards Working Group are they want to know why you want the information, what models will you be using, and what you hope to prove. Then they suggest that there are easier ways of modeling it using different models and different data, or that they have already done it, or they should do the analysis behind closed doors and just hand over the results, or, the past is the past, it is better to build models of the future and to guesstimate the answers.

Thus insiders can’t answer the question on why the prices are so high.

Recently HECO and the Consumer Advocate suggested that Aina Koa Pono sell biofuel to HELCO and that HECO ratepayers subsidize the cost to the tune of $26 million per year for 20 years.

HECO argued that this was okay because the average O`ahu bill would only be padded by a few dollars per month.  However, to limit community dissent, the costs were classified by HECO (confidential business information).

Why are prices so high?

HECO will say let us levelize the rates.

Let’s build a billion-dollar cable to Maui, built a multi-billion-dollar extension to the Big Island, install computers and telecommunication systems so that a central computer can measure in real-time the exact energy flow on every circuit on the grid, install wind and solar data collection points around the state,  build new computer models so that one  can use the data collection points and guesstimate the future wind speeds and cloud cover to anticipate future renewable energy flows onto the grid, and manage all of these energy flows and data with new computers including new hardware and software systems.

Complex, yes? Certainly. But then one rate can be established statewide and everyone will pay the same, really high, rate.

The simplest way to lower rates is to calculate the true costs associated with generation, transmission and distribution of several different scenarios and then to pick one solution that minimizes costs to ratepayers.

That is called planning.

But a key component of the HECO-DBEDT created Hawaii Clean Energy Initiative (HCEI) Energy Agreement was that all PUC regulatory proceedings focusing on planning (known technically  as IRP) were suspended from 2008-12.

From October 2008 until today there have been  no planning dockets.

For four years the utility has focused on ramming  through their preferred future.

Profits are soaring, payments to HEI’s elite are spiking, cutting wages for union members failed, electric rates are soaring, and people are getting upset.  Good news for the company, not so good for ratepayers.

The HCEI Energy Agreement refused to define clean energy, and had a number of questionable policies and assumptions:

The Energy Agreement (EA) states: 

Building power plants regardless of vog-based issues: “EPA’s Regional Haze Rules, designed to protect visibility in National Parks, are ambiguous as to the effect of naturally occurring haze. Controlling visibility impairing emissions from Company units would be fruitless and very expensive.” (EA, p. 42)

Using biofuels without evaluation air emissions:  “Allow electrical generation units to switch to green fuels (biofuels) without triggering New Source Review (NSR). Fuel switching could result in increased emissions (primarily NOx), potentially triggering NSR. Costs of NOx control on existing units switching to biofuels would be exorbitant with no appreciable benefit” (EA, p. 42)

The invisible hand of the market is better than regulation: “Guiding principles in GHG [greenhouse gas] reduction measures include ... a preference for incentives and market-based measures over regulatory penalties” (EA, p. 42)

Utility encroachment into free markets: “All parties will support reconsideration of the Commission’s ban on utility-owned DG [Distributed Generation].” (EA, p. 27)

Terminating a popular process: “The parties further agree to request Commission suspension of the current intra-governmental wheeling docket” (EA, p. 17)

Asking taxpayers to subsidize the destruction of the Borneo and Amazon rainforest to grow biofuels to create electricity: ““The parties will support continued federal tax support for biofuels and will seek their extension to cover the full range of biofuel products including crude palm oil.” (EA, p. 16)

Requiring quick regulation and penalizing regulators for unfriendly decisions: “It is suggested that there should be an expedited time period for the Commission to complete its review and issue an order approving or denying the plan within six (6) months. If the Commission rejects all or part ...there should be an explanation for non-approval and the implications of that non-approval on the utility’s asset investment and strategic choices for the upcoming three-year period. In order to continually reassess the ...plan on a regular and timely basis, it is suggested that if the PUC has not issued a decision within a defined period, the plan is automatically deemed “approved.’” (EA, p. 41)

Without conducting any comparative analysis of alternatives, the inter-island cable is required: “The Hawaiian Electric Companies are committed to integrating the maximum attainable amount of wind energy on their systems. is necessary to transmit the wind power produced on the other islands by undersea cable systems to Oahu.” (EA, p. 3)

Net Energy Metering (NEM) allows customers to sell excess solar energy to the utility grid during the day, receive electricity at night, and only pay on the net energy. Feed-in Tariffs (FiT) is a complex process that does not work for small systems. “The parties agree that NEM will be replaced with an appropriate feed-in tariff” (EA, p.  28)

So we now have what HECO envisioned, and it isn’t good.

But it’s not their fault. It’s ours.

We allow Hawai`i’s largest monopoly to control key parts of the State Government.

Remember the last reapportionment fight (2001) when one of the two HECO employees serving as a Reapportionment Commissioner wore their utility shirt to the meetings. They were there to safeguard certain legislative seats.

HECO isn’t hurting.

But they are concerned about their future. So forcing ratepayers to pay for costly gold-plated upgrades to transmission cables, telecommunication systems, and computers will mean that even if ratepayers stop buying utility-based electricity due to the high cost, HECO will continue to make money.

Taxpayers will have to pay for the utility’s stranded investment costs.

Since we are both ratepayers and taxpayers, we will pay and pay and pay.

 # # #


HECO needs to classify all materials concerning internal money flow because their competitors could used that information against HECO. You know competitors like, umm, let's see, hmm. Sorry can't think of their names right now.

I am appalled at the way HECO charges so much for their goofs. It's time for the people to stand up and protest. HECO has no competitors and monopolize the system therefore, we, as the people, have not been able to change to other services. I say we all stand up for what HECO is doing to all of us, whether it be a business or personal usage. HECO will drive people into bankruptcy. Do we want more people on our streets, as homeless? Do we want more foreclosures because we cannot afford such high energy costs? I pay about $500- $600 per month on all utilities in Hawaii. I know lots of people who pay much more. We, people of Hawaii, need help to fight HECO and the water and sewage companies. There is no competition, here in Hawaii so, right now, the people of Hawaii have no choice but to use what we have.

Hi Henry, I just got my report card from Hawaii Energy folks 2 weeks ago and they ranked me as #7 in 100 of my surrounding neighbors in energy efficiency. I work hard at NOT using Helco's energy. I have never owned a clothes dryer and when my solar water heater panel sprung a leak 3 years ago, I decided to use mostly cold water for almost everything including showers on hot days instead of getting it replaced. I live in Kona. My total kwh usage last month was 199 kwh. I tape my refrigerator doors shut and have my small box freezer on it's lowest setting. I use a laptop because those desk top pcs suck energy. I really deserve a reduced rate for conserving energy but now I realize that conserving energy doesn't make money for HELCo stockholders. I think the answer to our problem is to QUIT being so dependent on HELCO. Break free of corporate control is the key. Go off grid. Aloha, JK

Hi Henry, sure looks like those laws are made to benefit corporate interests like HECO. Time for us to demand that the state use our tax dollars to fund energy alternatives that don't depend on HECO. Like for example, installing solar electric panels on every house instead of paying billions of dollars to run an underground cable between the islands.There are people who live in Puna and Kona who generate their own electricity and have no HELCO hookup. That is what we all should be doing w/ our tax dollars -- working hard to free ourselves from HECO/HELCO control. Aloha, JK

JK, you may have mistakenly blamed "for profit" corporate interests. As reported in today's Star Advertiser article "Statewide Electric Bills Rise to Cover Increasing Fuel Prices" (March 8, 2012), the contradictory evidence to your thesis is that *non-profit* "cooperative" KIUC has the highest electricity rates in the State @ 41.4 cents/kWh -- versus *for-profit* "corporate" HECO @ 32.6 cents/kWh, MECO @ 36.3 cents/kWh, and HELCO @ 41.3 cents/kWh. Setting aside Murdock's Lanai La Ola solar farm, note that "Kauai utility KIUC has nation's highest photovoltaic penetration" [google this].

excuse me but the last time I calculated the cost per kwh for me in Kona it was 45 cents. In a few months it will be up to 50 cents per Kwh. HELCO's rates here are going up, up, up w/ no end in site. I just read a LTE in West Hawaii Today that now HELCO is trying to keep people from joining their solar program using all of their phony baloney tactics. We shouldn't be tolerating this kind of nonsense. There are numerous alternatives to use to generate electricity that would set us free from HELCO's control. We need to demand that the State quit catering to the big business and use our tax dollars for our benefit for a change. Aloha, JK

JK, distilling your posts my understanding is that you made two assertions: (1) type of utility ownership drives electricity rates; and (2) high PV penetration will lower electricity rates for ratepayers-at-large. The Star Advertiser article "Statewide Electric Bills Rise to Cover Increasing Fuel Prices" (March 8, 2012) in which non-profit cooperative KIUC has a higher (or if you like just as high) rate than for-profit corporate HELCO *refutes* your first assertion. KIUC Board Director Jan TenBruggencate’s blog post "Kauai utility KIUC has nation's highest photovoltaic penetration" (google this) *refutes* your second assertion. What did I get wrong?

Anonymous you forgot one thing. The public gets to own their own power plants. Our tax monies will fund our energy consumption. The public will be the investors instead a group of greedy private investors. Representative Denny Coffman from Kona recently proposed a plan to let Helco/Heco run the grid and have the State take over the power generating but guess what? it got shot down by Hermina Morita and the PUC. Although I would much rather not depend on the grid, at least Denny's plan was a start in the right direction of severing Helco/Heco from making profits off of public subsidized power generation. Aloha, JK.

Although I don't have the expertise on energy issues that Henry has, I did note in an article some time ago that grids on the Mainland can be independent. There are different reasons for that, of course, but for us, why must the oil and coal burners continue to operate the power grid? At least as an objective, at some time in the future, shouldn't those two functions be separated?

How to do that is a big subject I'm sure.

JK, regarding "public gets to own their own power plants ... public will be the investors" rather than “forgetting one thing” that was exactly my point that you apparently missed. Let me try again: KIUC is a *non-profit cooperative* meaning that utility is owned by, and operated for the benefit of, its ratepayers -- but as pointed out above KIUC has the State’s highest electricity rate. This is contradictory evidence that refutes your conjecture that there is a linkage between ownership structure and electricity rates.

Larry: “Why must the oil and coal burners continue to operate the power grid?”

HECO EVP Robbie Alm: I really think for us it was a matter of getting the mindset away from the notion that we are primarily a generation company. But we are not at a point where we don’t do any generation, and I actually think that is a mistake. Let me spend one more minute on it. All independent power providers are essentially on contract to us. If they ever decide that they don’t want to produce power for us -- for economic reasons or whatever -- they can get up and walk away. There may be penalty provisions in there but the reality is that they can get up and walk away. The utility, Hawaiian Electric, has what is called “an obligation to serve.” We are obligated to provide the power even if we lose money doing it. That’s part of a public utility. And that is part of the tradeoff for operating. So most observers have suggested that you always want some measure of obligation to serve power on your system. You want somebody like us that has a responsibility to give you power no matter what at some level on the system. And so I think blending in outside generation by third parties with all those other functions, we have a good business model. at 1:38:41

Curtis: “Why is my electric bill so high? ... If it is not HECO's fault, then who is to blame? … The simplest way to lower rates is to calculate the true costs…then to pick one solution that minimizes costs to ratepayers. That is called planning.”

The reality is the Hawaii's electricity system was *never* designed to solve "the problem" of minimizing costs to ratepayers. Rather than "problem solving" (inquiry) Hawaii energy policy makers have engaged in "solutioneering" (advocacy): jumping to the ideologically driven utopian “solution” of renewable energy and then passing legal mandates to get it implemented (wherein there was no planning n1 n2). With HECO’s March 2012 residential rate at 32.4 cents/kWh and HECO paying coal-burning AES Hawaii *only* 3 cents/kWh, this nearly 11:1 or 1000% economic gap is *economic injustice* to struggling working families, fixed-income retirees, and ratepayers-at-large. Like Mao’s ideologically-driven utopian Cultural Revolution that led to the Great Chinese Famine, this economic injustice has been needlessly self-inflicted on Hawaii ratepayers all because of ideology (e.g., Jade Moon HECO television commercials inferring that because Hawaii has an abundance of national resources, renewable energy must be the key to Hawaii’s energy future). So who is to blame? As Pogo said, "We have met the enemy and he is us."

n1 HECO CEO Dick Rosenblum saying of the Hawaii Clean Energy Initiative in 2008, “we don’t know how to do this” at 21:24

n2 House Energy & Environmental Protection Committee Chair Rep. Coffman concluding in June 2011 that “we don’t have a plan”

There is historical context behind why a power generating company also operates the power grid. It did make sense once, when no one else was generating power. It still makes a lot of sense now, according to the situation. But there can still be an "obligation to serve" on two separate organizations--one that generates the power, including power that comes on when the wind is calm and clouds cover the solar farms, and also an "obligation to serve" by carrying power from one point to the other.

There are also mixed models wherein power generation is at least partically distributed. Power can be generated locally and there can be local grids, interconnected with a larger grid. The silly looking building in Dubai (still not built) that was to have a wind turbine between each floor would have been capable of generating power for nearby developments because (when the wind is blowing) it would generate a surplus of power.

In a world when developers can propose power-generating projects the way they propose housing tracts, the "obligation to serve" can devolve into a kind of backup security arrangement.

Will we ever get there? I guess it would take some mixture of foresight, economics, and maybe a little technical progress.

OTEC or wave power can change the picture radically. Waves always wave, I believe. If that's accurate, then the equation is changed again. Instead of burning fossil fuels an increasing share of power could come out of the water, and less from burning anything.

Clearly we're not there, but one day it will be clear that we need to rethink the role of the traditional approach to power generation.

DBEDT should be pushing hard on this. The high cost of power works counter to business success. It keeps tourism entrenched because the cost of heating that pool water can be passed on to the visitors. For the rest of us, it's pay at the plug.

The national average is 9.83 cents per KwH. explain to me why its more than triple that here on oahu and the cost of shipping oil only adds a fraction of that to the total. HECO made record breaking income last year. The cost of fuel went down by around 5 percent recently yet noone on this island saw 5 percent rate reduction. We are just pawns. They buy laws and the only thing we do to stop it is blog on a website that almost noone can find. Give yourself a hand. You elected these guys that are in bed with big oil.

This blog is easier to find than the answer to your question.

It's easy, you don't even need HECO. I have a stand alone photovoltaic system that eliminates HECO. It works very well, even during cloudy days. We live in one of the most sun rich states where PV is a viable alternative. It's not cheaper than using HECO, but at least you know where the money goes. Ask yourself why someone would drive a Mercedes over a corolla. It's simple, "because they can" and it's that simple.

Do any of you Really believe that this high cost of electricity can be solved by voting for the right persons, "haha", keep dreaming because it ain't gonna happen. The only way to fix this is to put in your own off grid PV system, call HECO, and tell them to come and get their meter off your wall. You will however be forced to live within your means, no more frivolous running of the A/C anymore, and you must switch your stove, dryer to gas.

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