Monday, February 8, 2016

Message to the Legislature: Let the PUC do its job!

Last year after I retired from the Hawaii Public Utilities Commission (PUC), I ran into another retired legislator/department head at the airport.  While we waited for our flights we traded political "war" stories.  We left for our gates agreeing had we known back in our legislative days what we now know about running an agency or a department we would have been more discerning about the kind of bills that went through the legislature.

As I review bills, I cannot help but wince and want to reach out to the current PUC Chair Randy Iwase to express my horror and sympathy.  Here's an agency juggling a humongous workload affecting an electric system transformation requiring critical technical and economic analysis, a careful balance of keeping the lights at an affordable cost for all customers, not just those with access to rooftop solar.  Even more so, the PUC is in the midst of reviewing the largest business transaction in this State's history, whose approval or disapproval will impact most residents and businesses throughout the State, and will likely define Hawaii's business and investment climate for decades more.  Obliviously, the majority of the bills introduced on behalf of special interests will raise or pass off costs to the electricity customer or undermine the careful and systemic evaluations being done by the PUC in its fact finding investigations.

Take for example tomorrow's (February 9) hearing in the House Committee on Energy & Environmental Protection:

House Bill 2085  - reiterates the renewable portfolio standard targets, which is in a different chapter (269), and establishes transportation fossil fuels reduction targets in Chapter 196.  Aspirational goals should not be in statute.  The bill does not take into account the limitations, challenges and cost of redesigning the State's fuels infrastructure.  These mandates, especially for a planning horizon more than 20 years out, do not have any publicly available analysis to determine if they are achievable and can be cost-effective. It is axiomatic that sound analysis be done before the targets are mandated. But if you're just in it for the soundbites I guess this will do.

House Bill 2573 - prevents the PUC from approving power purchase agreements that prohibit the sale of electricity to third parties.  Typically, a power purchase agreement is a contract between an independent power producer and the regulated electric utility subject to the approval by the PUC.  Any agreement between the independent power producer and an unregulated party would not be under the jurisdiction of PUC unless it impacts any part of the Hawaii electric system and electric elements.

Inadvertent consequences may occur when the Legislature, by statute, impedes the PUC’s ability to thoroughly examine the economic, financial and technical viability of power purchase agreements.  It is the electricity customer that bears the cost of power purchases.  A bill such as this may inadvertently increase costs to consumers if the PUC cannot deny or approve with conditions, based on its findings, a power purchase agreement because of statutory restrictions.  For example, a developer may also be producing non-regulated energy products from the same plant and dump unrelated costs on the electricity power purchase side.

House Bill 2081 - authorizes public agencies to initiate public purpose projects through which a public utility will purchase fuel or electricity.  Under the guise of serving a public purpose, such a process may force a utility to purchase fuel or electricity at an unreasonable or highly subsidized cost. This opens the backdoor for a State or county facility to push costs off to the electricity customer rather than raise user fees or taxes to support the public purpose project.  This bill has the potential to undermine the PUC's duty to protect the electricity customer from unwarranted costs from public projects.

House Bill 2567 - establishes "substantial net benefit" as the standard the PUC must consider when considering a transfer or assignment of a franchise.  Obviously, serving a single purpose to  target one's opposition to the Hawaiian Electric/NextEra's by establishing a higher standard than what has been set by precedence/case law.  However, ironically, if passed, such a law would also be applied to all future transactions. Despite all the hoopla on public ownership, entities such as a cooperative would probably have a harder time to meet such a standard given unknowns such as purchase price and financing costs and potential grid defection as cost borne by the membership.

House Bill 2571 - prohibits an investor-owned utility from owning generation resources.  This bill usurps what should be within the PUC's authority and control. There are important on-going investigations and decisions to be made in various PUC dockets about the make-up of the generation fleet and how much of the fleet should or needs to remain in the utility's ownership and control to ensure reliability and stability of each island's grid.

House Bill 1751 -  broadens the definition of renewable energy.  Adds to the definition "other resources that replenish themselves at a sufficient rate for sustainable economic extraction in meaningful human timeframes."  Without a purpose clause or an example, it's hard to understand what new renewable resource this bill is suppose to cover.  Regenerative resources (plant/algae based) would already covered in the existing definition under biomass and biofuels.

House Bill 2592 - special purpose revenue bond for Pelatron Power Evolution LLC.  Different name but same players and technology.  I don't think much has changed since I wrote this post last year about whether this technology is ready for prime time.

House Bill 1823 - House Bill 1730 - House Bill 2566 - all three bill will affect the on-going PUC distributed energy resource investigation docket, 2014-0192 which is now in its second phase.  The docket involves technical and economic issues which impact all electricity customers and the stability, reliability and affordability of the electric system and accompanying rate design.  These bills, benefiting less than 25% of customers or certain special interest, will continue to drive up costs for all other customers.  The 2015 net energy metering cost-shift was $64 million, up from the 2014 total of $52 million.  This is the fixed cost of the electric system that net energy metering customers avoid and gets passed on to those who do not have rooftop solar.

The PUC ended net energy metering in October it's time to abide by that ruling and move on to the design of an electric system that is affordable and equitable for all electricity customers.

The current and complex technical, economic and social justice/equity issues within PUC dockets cannot be resolved in a Committee setting where expediency overtakes fact-finding to meet critical deadlines.  Let the PUC do its job. 

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