A contract for a new wind farm on Oahu’s north shore is raising questions about why a project developer doesn’t have to reveal seemingly critical financial information to state regulators who are charged with protecting consumer interests.
Boston-based First Wind and Hawaiian Electric Co. want the Public Utilities Commission to approve a new 69-megawatt wind farm at Kawailoa. But the company and the utility won’t say how much the project will cost to build and operate or what the developer’s profit margin is, according to Hawaii’s consumer advocate.
So how can the commissioners tell whether ratepayers are getting a good deal if they don’t have all the information?
State regulators’ lack of access to financial data is unusual and troubling, according to industry experts interviewed for this story, including consumer advocacy groups, the national trade group representing state public service commissioners and other state public utilities commissions.
Contracts negotiated between electric utilities and private developers ultimately have to be approved by the Hawaii Public Utilities Commission.
Neither PUC chairwoman Hermina Morita or Commissioner Mike Champley responded to questions for this story.
Charlie Harak, a senior attorney for energy and utility issues at the National Consumer Law Center, said that it was “questionable public policy” for the decision maker on renewable energy contracts not to have the underlying costs and economic data for a project. He said this was true especially if projects aren’t competitively bid – as is the case with most of the projects underway in Hawaii.
“It is exceedingly hard to know if the utility isn’t overpaying for a source of supply when the source of supply isn’t procured competitively and when noncompetitive suppliers underlying costs are not disclosed,” he said.
Since 2008, all renewable energy projects are required to be competitively bid, according to a PUC ruling. However, since then most of the projects that have gone into service, or are before the PUC, were projects that were already under negotiation with Hawaiian Electric and were exempt from competitive bidding, according to PUC documents.
These include the Kahuku wind farm on Oahu, the wind project known as Kaheawa II in west Maui and the Auwahi wind farm planned for south Maui. There are other grandfathered projects that remain in contract negotiations with Hawaiian Electric Co., including Sea Solar Power’s ocean thermal energy conversion project.
Oversight of renewable energy contracts vary from state to state with different utility models and commissions.
In Hawaii, Hawaiian Electric Co. which serves Oahu, the Big Island and Maui County is allowed to operate as a monopoly – a model that is common throughout the mainland. In exchange, is is required to provide service to all residents, even in areas that aren’t profitable. It’s subject to strict oversight by state regulators.
The state’s other utility company, the Kauai Island Utility Cooperative, is a nonprofit, community-owned utility, which is also subject to PUC oversight.
There are different mechanisms of ensuring that prices are competitive depending on specific state models. For instance, in Texas there is a competitive market with more than 100 utility companies that compete to provide the lowest prices for consumers.
Terry Hadley, a spokesman for the Texas Public Utilities Commission, said he didn’t know how Hawaii regulators could make a good decision without cost information.
“Boy, it would seem to me, how can you establish a fair return on equity if you don’t have access to what the costs are?” he said.
Hawaii’s consumer advocate has struggled with the issue.
In his formal statement on the Kahuku wind farm contract, Ono, the consumer advocate, said that it was difficult to assess whether the price that consumers would pay for the wind farm’s electricity was reasonable because HECO – and thus the consumer advocate – did not have access to the developer’s estimated project costs. And because the project was exempt from the competitive bidding process, there was nothing to compare it to. Nonetheless, the consumer advocate ruled that the cost was “just and reasonable.”
The office had requested this information from HECO while it was reviewing the contract but the utility didn’t provide it.
But Robert Thormeyer, a spokesman for the National Association of Regulatory Utility Commissioners said it was the job of commissions to get all the information they need to make a determination.
“Their job is to make sure that every power bill you pay is fair and just, and really the only way they can do that is by proving every cost in every contract they sign is in the [consumers’] best interest,” he said.
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