Ka`u News Briefs Wednesday, Dec. 25, 2013

      The utility companies first filed an application for the contract almost three years ago, in Jan. 2011. After the PUC denied it in September of 2011, the utilities re-negotiated with AKP and submitted a new proposal in Aug. 2012 with a lower per-gallon and still undisclosed biofuel price. The PUC pointed out that the lower price “does not necessarily mean that the new biofuel price is reasonable and in the public interest.”
      The commission also said, “The excess level of the biofuel price … is further evidenced by the (utility) companies’ request to establish and implement their proposed Biofuel Surcharge Provision, which is designed to authorize HELCO to pass through to HELCO’s and HECO’s ratepayers the difference between the cost of the biofuel and the cost of the fossil fuel that the biofuel is replacing, in the event that the cost of the biofuel is higher than the cost of the fossil fuel.
      “The companies have failed to convince the commission that the contract, if approved by the commission, will lead to lower and stable electricity costs for HELCO ratepayers. Instead, under the reference petroleum diesel price forecast scenario, the AKP-produced biofuel will consistently exceed HELCO’s forecasted petroleum diesel prices for most of the twenty-year contract term. Thus, the companies’ projected cost savings are not expected to occur until the latter part of the twenty-year contract term.”

`Aina Koa Pono's plan,which was turned down by the PUC this week, could have displaced cattle ranchers between Pahala and Na`alehu. Photo by Julia Neal

      While the commission recognized that the contract is intended to reduce the state’s reliance and dependence on fossil fuels, including the volatility of fossil fuel prices and supply limitations the amount of funds that are expended for importing fuel and greenhouse gas emissions, “the evidence regarding the external benefits of the AKP Project is not sufficient to convince the commission that the contract is reasonable and in the public interest.”

      In the first docket, the commission expressed its concerns that HELCO’s commitment to purchase an annual minimum quantity of AKP-produced biofuel has the potential to displace or curtail more economical, existing renewable energy resources or restrict the addition of other new low-cost, fixed price renewable energy projects. “Such a commitment, moreover, appears to benefit AKP, to the ratepayers’ detriment,” the PUC stated. “The commission’s concerns have not been alleviated by the companies’ filings in this proceeding.”
      The PUC also expressed concern that neither an independent, third-party assessment of economic impacts and potential externalities nor an environmental assessment have been produced for its review and consideration.
    “The commission rejects as unpersuasive and without merit the companies’ assertion that it is more appropriate to address externalities that relate to the AKP project in other forums and processes. Here, it is clear that AKP’s ability to obtain project financing is dependent upon the commission approving the contract. Without such approval, AKP will be unable to proceed with the project. Thus, the project and the contract, for purposes of considering the externalities in evaluating the contract, are intertwined.

      “While the Companies correctly note that the contract is for biofuel that will be manufactured within the state from a locally produced feedstock, the economic, environmental, social and other impacts associated with such an operation remain largely unknown and un-quantified at this time. The identification of the source crops is also unknown.” 

      Another unsupported presumption in the contract, the PUC stated, is the utilities assessment that AKP’s facility would create a direct economic benefit to the state in the form of a net increase in jobs and revenue taxes “because local biofuel production has a labor intensive agricultural component."
      The PUC was also not persuaded by the argument that its approval of the contract is necessary to enable the development of a large-scale, local biofuels production facility. “The commission’s rejection of the Biodiesel Supply Contract does not prevent AKP from pursuing a scaled-down version of its proposed bio-refinery project for the purpose of supplying biofuel to the transportation and other non-utility generation sectors.” Here, the commission concluded that ratepayers should not be required to “ensure the economic returns necessary to attract project financing” for the construction and development of AKP’s bio-refinery.
      Ka`u News Briefs will report on more from the PUC’s decision in upcoming days.

Keiki await the gift-giving, from educational toys and games to three-wheelers, bells and bags of rice and other food. Photo by Julia Neal

      The decision and all other documents filed in the docket are available at puc.hawaii.gov. Docket number is 2012-1085. Go to Dockets, Trending Dockets, `Aina Koa Pono and to documents.