LIFE OF THE LAND
76 North King Street, Suite 203
Honolulu, Hawai`i 96817
August 25, 2009
PUBLIC UTILITIES COMMISSION
465 S. King St, Room 103
Honolulu, HI 96813
Re: Docket 2009-0050: KIUC Rate Hike
Aloha Commissioners,
Life of the Land is Hawai`i’s own local environmental and community action group. Our mission is to preserve and protect the life of the land through sustainable land use and energy policies and promoting open government through research, education, advocacy, and litigation.
Because energy is the cornerstone of sustainability, Life of the Land has taken a leadership role in advocating for clean and renewable energy generated from Hawai`i’s many indigenous resources.
Life of the Land has participated in applications and regulatory proceedings before the Hawaii Public Utilities Commission (“Commission”) since 1971. Life of the Land hereby submits comments regarding Kaua`i Island Utility Cooperative (“KIUC”) proposed rate hike. We are contemplating filing a Motion to Intervene in the Docket.
Background
KIUC acquired the Citizens Utilities Company’s Kaua`i Electric Division in late 2002. (Decision and Order No. 19658, filed on September 17, 2002, as amended by Decision and Order No. 19755, filed on October 30, 2002, in Docket No. 02-0060). KIUC financed the sale by borrowed funds from the U.S. Department of Agriculture, Rural Utilities Service ("RUS"), and the National Rural Utilities Cooperative Finance Cooperation ("CFC").
Since that time, KIUC has not had a rate case (the last one was completed in 1996. See KIUC 2007 Annual Report, RJH-102, page 8), and has not altered its rate design (the existing rate design is 15 years old. See Application, page 12).
KIUC has not completed a regulatory planning docket. In 2005-06 the Commission determined that KIUC should follow the existing IRP Framework with minor non-substantive changes. The Commission opened KIUC's IRP-3 docket on June 20. 2006. KIUC submitted their plan to the Commission on December 18, 2008. In late 2008 the Commission closed all utility IRPs. The utilities including KIUC, and numerous non-utility entities including Life of the Land, are currently parties in a docket working to develop a new Clean Energy Scenario Planning (CESP) Framework to replace IRP.
The average KIUC residential rate in 2006 was 32.8 cents per kilowatt-hour (kWh) (KIUC Strategic Plan, RJH-102, page 8). KIUC may have the highest average residential rate in the United States based on a 10-year moving average. “KIUC had more than 29,000 customers divided as follows: 76 percent Residential, 13 percent Commercial, 10 percent Street Lighting, 0.4 percent Industrial and less than 0.1 percent Irrigation. Revenues, on the other hand, were divided as follows: 36 percent Residential, 35 percent Industrial, 28 percent Commercial, 0.8 percent Street Lighting and just more than 0.1 percent Irrigation.” (KIUC Strategic Plan, RJH-102, page 7)
“KIUC has 116 megawatts (MW) of firm ... The all-time peak demand on the KIUC system is 77 MW, and the largest units are Kapaia's CT-1 (27.5 MW), Port Allen's GT-2 (22.6 MW) and Port Allen's GT-1 (17.5 MW).” (KIUC Strategic Plan, RJH-102, page 9)
“KIUC has 161 miles of 69 kilovolt (kV) transmission lines and 1,202 miles of 12 kV distribution lines. Approximately 215 miles of distribution lines are underground. The far west side (Mana &. PMRF) and the north shore (Kilauea to Ha'ena) rely on only one transmission line each.” (KIUC Strategic Plan, RJH-102, page 10)
Current Application
“In preparing this rate case, KIUC's management worked with the Board in (1) reviewing the depreciation study, (2) developing the Equity Management Plan (EMP), (3) establishing a test year budget, and (4) determining the revenue requirement to be proposed as part of this application.” (Hee, KIUC 10-T-100, 26:7-11)
The issues in this regulatory proceeding are:
1. Determine this Application to be a completed application, pursuant to HRS § 269-16, as amended, and HAR § 6-61-87;
2. Conduct a public hearing on the island of Kaua`i to consider this Application in accordance with HRS § 269-12, HRS § 269-16, and HAR § 6-61-30;
3. Find that KIUC's present rates and charges for its customers are unjust and unreasonable and will not allow KIUC to earn a sufficient level of revenues in order to ensure its ability to comply with its debt loan targets and covenants, meet its funding needs, and build sufficient equity to ensure its ongoing financial health and viability;
4. Approve, pursuant to HRS § 269-16, as amended, the rates and charges proposed by KIUC as set forth in Exhibit KIUC 5, together with the tariff changes resulting therefrom or set forth therein, and authorize KIUC to place into effect the proposed rates, charges and changes after the date of authorization by the Commission;
5. Approve, pursuant to HRS § 269-16, as amended, and HAR § 6-60-6, the request to (a) modify KIUC's existing Energy Rate Adjustment Clause ("ERAC") to remove the efficiency component in the existing ERAC such that KIUC will recover only actual fuel and purchased power costs, and (b) rename it the Cost of Power Adjustment ("COPA");
6. Approve the removal of the condition/requirement imposed upon KIUC pursuant to Ordering Paragraph No. 8.b (Part VIII, subpart 8.b) of Decision and Order No. 19658 ("Decision and Order No. 19658"), issued on September 17, 2002, in Docket No. 02-0060, which requires KIUC to seek approval from its lender to retire patronage capital of twenty-five percent (25%) of its margins on an annual basis, to instead allow KIUC to have the discretion to decide when and how much patronage capital should be retired in any given year; and
7. Grant such other relief as may be just and reasonable under the circumstances.
KIUC has included an Equity Management Plan (EMP) in their filing and states that it plans to borrow $300 million from 2009-2018 to finance a variety of projects. The expenditures and the proposed projects will impact KIUC’s bottom line. To the extent they do so, it is important that they be examined.
Times Interest Earned Ratio
The Times Interest Earned Ratio (TIER) is widely used as an indicator of the extent to which earnings are available to meet interest payments.
Times Interest Earned Ratio = (net income + interest) / interest = (net income/interest) +1
“RUS requires that KIUC achieve an average minimum TIER level (i.e., RUS TIER) of at least 1.25 for the highest two out of three calendar years.” (Application page 10)
“[T]he amortization of KIUC's acquisition adjustment was removed from operating expenses for purposes of calculating the regulatory TIER level as required in the PUC's Decision and Order No. 19658” (KIUC DJB-207, page 10)
“KIUC's proposed rates based on a Regulatory TIER of 2.50 would result in a RUS TIER of 2.27.” (KIUC 10-T-400, Cuthbert, 18:4-14) “Being very capital intensive, depreciation and amortization of the utility plant costs $16.2 million or 9.9% of revenues.” (KIUC RJH-102, page 14)
Rate Design
Hawaii Revised Statutes §269-16 Regulation of utility rates; ratemaking procedures. (a) All rates ... made, charged, or observed by any public utility ... shall be just and reasonable.
Hawaii Supreme Court: “[T]he rule is that the burden is always on the applicant to prove justification for a requested increase before the Commission. In re Application of Hawaiian Electric Co., Ltd., 56 Haw. 260, 270, 535 P.2d 1102, [1109] (1975).”
KIUC must show that their rates are just and reasonable in order to receive approval from the Commission for a rate hike.
How is “just and reasonable” defined?
“Whether the general rate increase, rate ... are just and reasonable, not unjustly discriminatory, and do not make, give, or cause any undue or unreasonable preference, prejudice, or advantage to any particular person, locality, region, district, island, or description of traffic.” (Docket No. 2006-0396, Order No. 23625)
“All charges made for any service ... shall be just and reasonable, and every unjust and unreasonable charge for such service or any part thereof, is prohibited and declared to be unlawful. It shall be unlawful ... to make, give, or cause any undue or unreasonable preference or advantage to any particular person, locality, region, district, island, or description of traffic, in any respect whatsoever; or to subject any particular person, locality, region, district, island, or description of traffic to any unjust discrimination or undue or unreasonable prejudice or disadvantage in any respect whatsoever” (Docket No. 2008-0133, Order Suspending Application, August 7, 2008)
KIUC’s Position
“KIUC believes any rate design changes should only be made after the revenue requirement is determined and the revenue increase is authorized to provide KIUC with the increased revenue on an across-the-board basis.” (Docket No. 2009-0050, Exhibit KIUC 10-T-100, Hee DT, 29:9-12)
“KIUC recognizes that its current rate design was established approximately 15 years ago when the utility was investor-owned, and thus does not recognize KIUC as a cooperative. In addition, the current rate design does not take into consideration various initiatives that KIUC and its Board of Directors believe are important and essential for a cooperative and the energy future of Kaua`i.” (Docket No. 2009-0050, Exhibit KIUC 10-T-100, Hee DT, 29:14-19)
Life of the Land Analysis
Hawaii statutes and case law state that any rate hike must be “just and reasonable”. This requires thoughtful rate design analysis which must include consideration of cross-subsidies, and include alternative rate structures such as time of use rates, stand by charges, and inverted block rates. KIUC recognizes this by “working” on such an analysis, but KIUC falls short in that not even a rough sketch of their analysis is included in this docket.
Docket 2009-0050 PART II
"The advantage, in KIUC's opinion, of allowing the review of KIUC's to-be proposed rate design as part of the current proceeding is that it should result in certain administrative efficiencies. ... In other words, once the to-be-proposed rate design is established, that rate design would then be implemented to provide KIUC with the same revenue to meet the approved revenue requirement established in the first phase". (KIUC Response to PUCIR-102-C) "KIUC also believes that it would be appropriate at that time for any interested parties ... to have another opportunity to seek to intervene or participate in the review of the to-be-proposed rate design" (KIUC Response to PUC-IR-102-B3)
Life of the Land Analysis
We would hope that KIUC is open and supportive of interventions by any groups seeking intervention in part 1, so that those intervenors are up to speed on the issues and the documents if there is a part 2. Alternatively, the Commission may decide that they should be separate dockets.
Historic and Future Sales
Sale forecasts are always difficult, but much more so today, due to the current world-wide economic shocks and resultant disequilibrium. KIUC presents a rosy picture for 2011-2014 (See Attachment 4: KIUC SBH-801) which does not appear to be supported by recent data.
(1) Request For Proposal (June 23, 2006) (page 4)
www.kiuc.coop/pdf/rfp/rfp_green_rate_renewable_sources.pdf
The historic system peak demand of 77 MW occurred in December 2004. Energy sales have grown at a compound annual rate of approximately 2.5% over the last five years.
Year Peak (MW) Annual Sales (MWh)
2001 71.1 406,500
2002 72.1 414,500
2003 73.5 431,300
2004 77.0 445,300
2005 76.2 448,600
(2) Docket No. 2009-0050, Exhibit No. KIUC 10-T-800 page 4
2007 466,900
2008 453,790
(3) Black & Veatch Presentation October 30-31, 2008
KIUC Integrated Resource Plan
2009 82.01 492,218
2014 90.59 568,000
2018 98.91 620,000
(4) Forecast Annual Sales Growth KIUC SBH-801
Year Increase Annual Sales (MWh)
2010 <410,000
2011 8.32%
2012 7.68%
2013 7.13%
2014 6.66% >540,000
(5) Docket No. 2009-0050, Exhibit KIUC 10-T-200, Bissell page 7:8-12
“DBEDT's 2nd Quarter 2009 Outlook for the Economy forecasts that the economy will remain down through 2009 with some improvement in 2010. Hawaii's real Gross Domestic Product (GDP) is expected to decline 1.6% in 2009, with a 0.4% growth in 2010. Beyond 2010, the gradual recovery is expected”
(6) Docket No. 2009-0050, Exhibit KIUC 10-T-200, Bissell page 8:2-14
“Until the United States, and to some extent, the global economy shows significant improvement in real GDP and unemployment levels begin to decrease, we believe that visitor arrivals to Kaua`i will continue to remain down and the Kaua`i economy will continue to struggle or at least remain at current levels through the TY ... we are projecting 2010 TY kWh sales levels to be 90% of 2008 sales. ... 2011 showing modest job growth of around 0.5% and real GDP
growth expected to reach 0.9%.”
(7) DBEDT’s Outlook for the Economy: 2nd Quarter 2009 (May 2009)
http://hawaii.gov/dbedt/info/economic/data_report s/info/economic/data_reports/qser/outlook-economy
“Overall, Hawaii's real GDP is projected to decrease 1.6 percent in 2009, compared with the previous forecast of negative 0.2 percent growth. Real GDP is expected to manage 0.4 percent growth in 2010. Beyond 2010 the gradual recovery is expected to continue with modest job
growth of around 0.5 percent for 2011. Visitor arrivals should show a healthier, 4.3 percent increase in 2011. Hawaii's GDP growth in 2011 is expected to reach 0.9 percent. This gradual recovery will continue into 2012, assuming national and international economic conditions continue to improve.”
(8) Hawaii Council on Revenues (June 1, 2009)
www6.hawaii.gov/tax/cor/2009gf05-28-with0601-Rpt2Gov.pdf
“Revised forecasts of State General Fund tax revenues for FY 2009 through FY 2015 are listed in the table below:
Year % Growth From Previous Year
2009 -9.0%
2010 0.0%
2011 5.6%
2012 5.2%
2013 6.0%
2014 6.1%
2015 4.9%
A long slow economic recovery for the U.S. and Hawaii would be consistent with the Council’s forecast that in the coming fiscal year 2010 no meaningful variation is plausible from the levels to which State General Fund tax revenues will settle in FY 2009”
(9) University of Hawai'i Economic Research Organization (UHERO) Hawai'i
Quarterly Forecast Update: State Budget Crisis Threatens Recovery
(June 12, 2009) http://uhero.prognoz.com/Default.aspx?src=forecast
“The outlook for international visitors has worsened ... The situation for Hawai'i hoteliers is bleak. We expect the occupancy rate to average 66% this year and to remain below 70% until 2012. Aggressive discounting will continue, and the average daily room rate this year will be nearly 12% lower than 2008. Total visitor expenditure will fall by about 10% in 2009 and will not firm until 2011. The industry will see additional job losses. The unemployment situation has deteriorated more rapidly than we had hoped, and the unemployment rate for the state as a whole will average 7.4% this year and 8.1% in 2010. Unemployment will only gradually recede thereafter. ... There are now a few signs that the worst of the US and Japanese downturns may soon be behind us. It is harder to find such "green shoots" here in Hawai'i. The best news is that US arrivals appear to have stabilized, albeit at a level far below the numbers we saw before the beginning of the current downturn. There has not yet been any decisive bottoming out of local jobs. We continue to expect the Hawai'i economy to have stabilized by the end of the year. But it remains difficult to see where a robust recovery might come from”
(10)DBEDT expects Hawaii economy to worsen, turn around in 2010
Pacific Business News (July 17, 2009)
www.cbcpacific.com/localnews/viewarticle.php?id=5549
“The Department of Business, Economic Development and Tourism is expecting Hawaii’s economy to slow more in 2009 than previously forecast, but a turnaround is expected in 2010. ... The economy will be better in 2010, however, as DBEDT said it expects it to stabilize with a modest 1.3 percent growth in visitor arrivals and slight increases in real personal income and real GDP. ... DBEDT said it expects modest growth in Hawaii’s economy in 2011, with a 4.6 percent increase in visitor arrivals and spending up 7.2 percent. Real personal income is expected to increase 1 percent and real GDP by 1.6 percent in 2011. The state’s job count could see a 0.5 percent increase.”
(11) Heavy Reliance on Tourism Has Hawaii's Economy Hurting
Wall Street Journal (August 17, 2009)
http://online.wsj.com/article/SB125047318664935729.html
“Hawaii is facing its worst recession since becoming a state 50 years ago, dragged down by its reliance on a single industry.”
Life of the Land Analysis
KIUC appears to be overly optimistic about the growth rate in demand for electricity in 2011-2014. More emphasis should be placed on analyzing slower growth rates. The changes in growth rates will directly affect both the need for future generation and the ability to defer current capital expenditures.
Tensions
"[F]or a cooperative such as KIUC, its ratepayers and shareholders are essentially one and the same. As such, this inherent potential conflict between ratepayer interests and shareholder interests does not exist." (KIUC Response to PUC-IR-101)
Life of the Land Analysis
While the tension is between stockholders and ratepayers for Independently Owned Utilities such as HECO, MECO & HELCO -- and while such tensions largely do not exist in electric cooperatives where the owners and ratepayers are for the most part the same group – the tension in electric cooperatives is between creditors who contribute most of the capital and ratepayers who have different aspirations and goals.
KIUC’s proposed expenditures (2009-2018)
* $75 million for a 1X1 Solar Titan 14.2 MW combined cycle combustion turbine which is anticipated to be operational by 2012. This facility is expected to be multi-fuel capable and enable KIUC to burn diesel, naphtha, and biodiesel. The 1X1 Solar Titan Combined Cycle could be powered by multi-fuels: diesel, naphtha, and bio-diesel. This appears to mean that KIUC is considering (a) fossil fuels; (b) biofuels; and (c) a mixture.
If it is fossil fuel powered, then this appears to violate the State’s goal of no new power plants. If it is biofuel powered, then a great deal of questions exist regarding which biofuels are used. The Hawai`i Public Utilities Commission has not approved a biofuel contract and the Hawai`i Department of Health has never permitted a biofuel generator. If it is a mixture, then the data on what impact it would have does not yet exist. HECO has just opened a docket to look at the impacts of mixing Low Sulfur Fuel Oil with Palm Oil; and of using Palm Oil is a MECO diesel fired generator.
* $160 million will be spent on a 20 MW biomass to energy facility to be in service by 2015
* $70 million on 11 MW of hydroelectric facilities to be in service by 2015
* KIUC anticipates entering into Purchase Power Agreements (PPAs) for 5 MW of photovoltaic projects during the period covered by the EMP.
* KIUC plans to complete of a second transmission line to the North Shore. This proposed line had been halted in the 1990s in the Kalihiwai area due to community concerns about aesthetics and the impact to endangered and threatened birds.
KIUC’s predecessor agreed not to work on the line for 10-years, that period is now over, and work may move forward. While a general statement appears in KIUC’s testimony (Hee pages 4-5) – “A modified route is being considered and planned for a portion of the new transmission line to address potential environmental concerns’’ -- the specifics are NOT spelled out in KIUC’s application and testimony.
Life of the Land Analysis
KIUC talks about the need for greater renewable energy and energy efficiency but appears to be overly focused on maintaining a fossil fuel based future. It is important for Hawaii to move towards indigenous low climate impact energy systems.
Automatic Fuel Rate Adjustment Clause
KIUC has an Automatic Fuel Rate Adjustment Clause known as the Energy Rate Adjustment Clause (ERAC). KIUC requests changing the name of ERAC to the Cost of Power Adjustment (COPA).
“Under the current ERAC, which was established over 15 years ago under the prior owner Citizens, the utility is provided with an incentive to operate more efficiently by allowing for the recovery of additional revenues to the extent it can operate more efficiently than an established heat rate target.” (KIUC Application, pages 16-17; KIUC 1: Hee, 10-T-100, 40:18-24)
“This ERAC incentive provided a financial cushion for many years that enabled KIUC to avoid seeking a rate increase earlier, during which time KIUC was able to lower its debt levels while also returning over $20 million dollars to its members through patronage capital and other refunds. However, ERAC also works in reverse when energy prices fall.” (Hee, 10-T-100, 41:2-6; pdf page 217 of 438)
KIUC’s argument and proposals to amend its Automatic Fuel Rate Adjustment Clause raises two serious issues: (1) Why do efforts to beat an established heat rate work in reverse when demand falls; and (2) Why didn’t KIUC mention or comply with HRS § 269-16? (In its recent Rate Case, HECO cited the requirement and argued that they should pass along the total cost to ratepayers)
Hawaii Revised Statutes is explicit: “HRS § 269-16 (g) Any automatic fuel rate adjustment clause requested by a public utility in an application filed with the commission shall ... (2) Provide the public utility with sufficient incentive to ... encourage greater use of renewable energy” (Act 162-2006, SB3185 SD2 HD2 CD1)
Life of the Land Analysis
KIUC’s analysis is focused on letting the public know that they charged too much ERAC over the past years, that they are ending the practice, and changing the name to COPA. But the analysis falls short on elaborating on how the COPA can be used to push for greater renewable energy penetration levels.
Price Elasticity
KIUC argues in part, that in the recent past, the higher prices of electricity sold by KIUC have resulted in lower demand. This change in “price elasticity” was first noted by Hawaii’s electric utilities following the oil price spike of 2008. “I believe that KIUC's lower electricity sales are also attributable to an increased penetration of renewable projects, customer efficiency measures, price elasticity associated with high 2008 rates, and to some extent colder than normal weather conditions during the first few months of 2009.” (Exhibit KIUC 10-T-200 Bissell DT 7:2-6, emphasis added).
Life of the Land Analysis
Nowhere in KIUC’s filing, is mentioned how a 10.5% jump in prices will impact sales through additional price elasticity effects. The result may well be that KIUC will need to file a new docket to acquire additional rate relief for the impacts resulting from implementing the rate hikes proposed in this docket. Price elasticity will counter the effect of the rate hike. This issue needs to be examined.
Greenhouse Gases
“KIUC's Strategic Plan calls for the reduction of greenhouse gases to 1990 levels by 2023, which is equivalent to approximately 50% renewable generation.”
Life of the Land Analysis
Kaua`i will be greatly impacted by climate change. Water levels along the coast and the Alakai Swamp will rise. Low lying areas will be under a great deal of threat. It is not too soon to be planning for the future. KIUC considers only the greenhouse gases associated with the actual burning of the fuel in a generator and does not consider the life cycle impacts associated with biofuels.
Furthermore, there is scant information on greenhouse gases in their application, and what little exists is less than credible. A small number of nonpeer reviewed studies published by biofuel proponents are cited. KIUC’s focus is on emissions during burning and not the emissions associated with extractive, transporting and use of the fuel.
Employees
The proposed rate increase is not uniform across all rate classes. The Employee Discount will increase (KIUC Response to PUC-IR-101 Attachment Part B) "This cost-of-service study is designed to allocate costs to KIUC's seven customer classes. KIUC has several possible rate adjustments or other rate considerations within each customer class. Using the residential customer class as an example, there is ... [a] KIUC employee discount" (Attachment KIUC LAT-602, 2009 Electric System Cost-of-Service Study, page 16; KIUC Application Volume 2, pdf page 251)
Some years ago there was mention in a Kaua`i Electric Division or KIUC document that the utility employees received a discount in their electric rate and that they also used more electricity than the average ratepayer. This may indicate that as price falls, demand rises, or it may reflect other factors such as income or family size.
Distributed Generation
The tension between centralized generation and distributed generation dates from the first years of electricity in the U.S. Nowhere is there greater tension than Kaua`i, which has the distinction of having both the highest utility rates in the nation and the highest per watt solar installations in the country. Yet, KIUC’s focus is on centralized power with no real analysis of the threats and opportunities of distributed generation:
KIUC members led U.S. in solar production
By Paul Curtis - The Garden Island (July 10, 2009)
“Kaua'i Island Utility Cooperative members who installed their own photovoltaic systems piloted the utility to lead the nation in solar watts per customer (47.1) in 2008, and cumulative solar watts per customer (70.6) through the same year.
That's according to the 2008 Top Ten Utility Solar Integration Rankings, published in May by the Solar Electric Power Association, for the customer side of the electric meter or member-installed solar systems designed to generate electricity.
KIUC also ranked second nationally in terms of PV systems installed by consumers in 2008, with the 2008 total solar watts per customer figure being second in the nation for either side of the electric meter, behind only the San Francisco Public Utilities Commission's.
In the public power utilities category, KIUC was again second in the nation only to San Francisco in the category of solar watts per customer, and third behind San Francisco and Oakland, Calif. in the cumulative category.”
http://saveKaua`i.org/energy/kiuc-members-led-u.s.-solar-production
http://goKaua`i.blogspot.com/2009/07/energy-kiuc-members-led-us-insolar.html
DuPont News, January 30, 2009
Pioneer Facility Uses Solar Power to Produce Clean, Renewable Energy
“DuPont has installed its largest photovoltaic solar energy facility at its Pioneer Hi-Bred Waimea Research Center in Kaua`i, Hawaii.
The Waimea photovoltaic installation is comprised of 1,500 panels – made from several DuPont photovoltaic materials -- produced by Evergreen Solar and installed by REC Solar.
The one-acre array is capable of generating about 85 percent of the energy needs of the research facility. It is expected to generate 706,205 kilowatt hours (kwh) annually, or enough power for 64 average-size homes. By using renewable energy, the facility will avoid carbon dioxide emissions equivalent to about 100 cars annually and will save Pioneer about USD 200,000 per year in avoided purchased electricity costs. The installation, which was started a year ago, was completed and fully operational in December 2008.”
www2.dupont.com/Media_Center/en_US/daily_news/january/article20090130.html
Lihu`e Airport
“The Hawai‘i State Department of Transportation yesterday entered a series of agreements with Hoku Solar Inc. in which the DOT will purchase solar electricity from photovoltaic systems to be installed at airports statewide, according to a joint press release.”
http://saveKaua`i.org/energy/lihu%E2%80%98e-airport-harness-sun
“Reuters (December 29, 2008) Hoku Solar reported it had completed the engineering, design and procurement phases for the projects, and that it commenced system installation earlier this month at two DOT project sites on the island of Kaua`i. Hoku expects to complete the installation of all seven systems by the end of the first calendar quarter of 2009”
www.reuters.com/article/pressRelease/idUS167394+29-Dec-2008+MW20081229
Military Installations
PMRF to place solar panels on 10 buildings BY The Garden Island (July 8, 2009)
“Photovoltaic panels to allow generation of electricity are planned to be placed on 10 buildings at the U.S. Navy Pacific Missile Range Facility at Barking Sands.
An architectural and engineering contract has been awarded to Honolulu-based SSFM International, Inc., according to a Navy press release.”
www.Kaua`iworld.com/articles/2009/07/08/news/Kaua`i_news/doc4a542d24844c8565099488.txt
Grand Hyatt Resort and Spa
Kaua`i parking garage keeping employees cool while helping the environment. KHNL (Aug 12, 2009)
“It's probably one of the coolest parking garages you'll see and it's helping out the environment as well. For about a year now, the Grand Hyatt Resort and Spa on Kaua`i's south shore has treated its employees to a pretty cool parking garage. The roof is actually made up of these photovoltaic panels. "It's beneficial to us because it keeps our cars cool and it's also kind of attractive," Employee Bill Javelosa said.
It took the owners a long time before finally going ahead with this project. "It was a big commitment for them to make, around 3-million dollars to install and it doesn't have an immediate tomorrow turnout investment," general manager Doug Sears said.”
http://www.khnl.com/Global/story.asp?S=10921911
POIPU, KAUA`I, HI – October 1, 2008 – “Grand Hyatt Kaua`i Resort & Spa ... partnered with SunPower Corporation, manufacturer of high-efficiency solar cells, panels and systems, to install the 18,500 square-foot, 280-kilowatt system over the employee parking lot, providing shaded parking as well as clean, renewable solar power for the resort. ... The output from the system will reduce CO2 emissions by over 230,000 tons, further lessening oil dependence by at least 7,000 barrels annually.”
www.Kaua`i.hyatt.com/hyatt/hotels/newsdetails.jsp;jsessionid=
APAF2E5VZCHYUCTEAGCCFFIKMQAYKIV0?newsId=18130326
National Tropical Botanical Gardens
Green Building Kaua`i: The First LEED-Certified Building In Kaua`i By Jeff Siegel (August 21, 2009)
“ National Tropical Botanical Gardens (NTBG) in Kaua`i ... [is] the first LEED certified building on the island ... A 30 Kw photovoltaic system on the roof”
www.greenchipstocks.com/articles/green-building-Kaua`i/478
Wilcox Memorial Hospital
Renewable Energy World (March 19, 2009)
“Sunetric, the state’s largest locally owned solar integrator, installed the 500 kilowatt system at Wilcox Memorial Hospital on the island of Kaua`i, making it also the first solar farm installation at a Hawaii hospital.”
www.renewableenergyworld.com/rea/partner/sma-america-inc-2081/news/article/2009/03/sma-america-tapped-for-solar-farm-installationat-hawaii-hospital
Life of the Land Analysis
Distributed Generation has arrived in Kaua`i. KIUC needs to evaluate its impact on both this rate case and the accompanying EMP.
DUE DILIGENCE
Life of the Land has reviewed KIUC’s Integrated Resource Planning documents, all Board meetings since the fall of 2008, the Equity Management Plan, KIUC’s website, KIUC’s Application and Testimony, and various Information Requests.
We sought to understand answers to the following questions:
When did the Board realize that they had entered a new paradigm?
What due diligence did the Board and the KIUC leadership perform?
What options were considered?
KIUC started the Integrated Resource Planning Process through a series of reports:
Renewable Energy Technology Assessments (Black & Veatch, 2005)
Energy Efficiency Potential Study (KEMA Inc., 2005)
Strategic Plan (2007)
Updated Strategic Plan (2008)
Electricity Revenue falls 42% in the last month of 2008
(November $14.4M --> December $8.3M)
(See Attachment 1: KIUC Monthly Financial Reviews; Attachment 2: Net Income $M; Attachment 3: Changes in Demand from Previous Year)
How did the Board adjust?
What do the Board minutes reflect?
What options were considered?
“Regular Meeting ... December 16, 2008 ...
12.2 Approval of IRP for filing to Hawaii Public Utilities Commission
12.2.1 Board Resolution 17-08 - The motion to approve passed unanimously. [Dir. Iha/Dir. Tacbian]” (www.kiuc.coop/pdf/board/minutes-2008-1216-APPROVED.PDF)
“WHEREAS, by Resolution 06-09 passed at the Board's April 28, 2009, Regular Board Meeting the Board of Directors approved a new Equity Management Plan ("EMP") for the years 2009 through 2018” (KIUC RJH-101, page 1)
“Regular Meeting ... April 28, 2009 ...
14.2 KIUC 2009-0018 Equity Management Plan (EMP), Resolution 06-09 - Mr. Richard Cuthbert of RW Beck gave a brief presentation.
14.2.1 The EMP is a financial forecast for a 10-year period based on the representations included in KIUC's Integrated Resource Plan (IRP) that was approved for submission to the Hawaii Public Utilities Commission (HPUC) on December 16, 2008 (Board Resolution 17-08).
14.2.2 The tentative rate case schedule, if the Board approves the EMP:
(a) May 26th Board Meeting - approval of the overall level of rate increase and
what type of increase it would be.
(b) First week of June - A third public meeting
(c) June 23rd Special Board Meeting - action on the final rate increase proposal.
(d) End of June - file with the HPUC.
14.3 A motion to adopt was made by Dir. Smith, seconded by Dir. Iha. Dir. Sullivan is not in favor because he is not in agreement with the previous work that was done on the Integrated Resource Plan (IRP) prior to becoming a Director. The EMP and the investments proposed therein represent almost a complete emphasis on generation as opposed to other capital expenditures that might benefit the members in reducing their energy use. He does although, agree with the need for additional revenue to come in through the Rate Case to support investment in the Co-op. The motion carried 8 to 1.”
(http://www.kiuc.coop/pdf/board/minutes-2009-0428-Approved.PDF)
“EMP attempts to achieve an optimum balance between sometimes conflicting interests in terms of a ... capital expenditures to construct renewable energy generation technologies and reduce reliance on high-cost fossil fuels, and capital expenditures to maximize the generation efficiency of KIUC's existing fleet of fossil fuel fired generation.” (KIUC 10-T-100, 27:17-24)
“KIUC's EMP, which is included as Attachment KIUC DJB-207, provides the cooperative with a long range financial projection which balances key financial planning measures such as: ... Achieving the Hawaii renewable portfolio standards and ... levels for greenhouse gas emission reductions ... Evaluating the amount and timing of future rate cases.” (Exhibit KIUC 10-T-200, 29:13-30:5)
“The EMP incorporates and projects the need for additional rate increases and rate cases in 2012 and 2015.” (KIUC 10-T-200, 32:3-4)
“Capital improvement expenditures are projected to equal a total of approximately $499 million over the 10-year study period. Capital expenditures were projected based on information in KIUC's five-year construction plan, long range plan, and resource plan. ... Subsequently, KIUC developed the following modified assumptions regarding timing and costs to develop new generating capacity for purposes of this EMP analysis that still meet KIUC's renewable energy goals” (KIUC DJB-207, page 18)
“Kaua`i Island Utility Cooperative 2009 Equity Management Plan ... Alternative Scenario 1 - Low Load Forecast ... Alternative Scenario 2 - Continuation of Capital Credit Retirements ... Alternative Scenario 3 - Reduced 2010 Rate Increase” (KIUC DJB-207, page 7)
“WHEREAS, by Resolution 09-09 passed at this June 23, 2009 Special Meeting of the Board of Directors, the Board of Directors approved certain modifications to the EMP as explained in said Resolution 09-09.” (KIUC RJH-101, page 1)
“Regular Meeting ... June 23, 2009 ... Resolution 09-09 ... the Board has determined to accept the recommendation of Staff and Regulatory Counsel to file the said Application substantially in the form presented to the Board, which includes a slight modification to the overall revenue requirement set forth above, and in so doing also approve the proposed new rates contained therein.” (http://www.kiuc.coop/pdf/board/minutes-2009-0623-Special-Apprvd.PDF)
“Special Meeting of the Board of Directors, Kaua`i Island Utility Cooperative ... June 23 ... Minutes ... After discussion on the motion of Director Iha and the second of Director Bain Resolution 09-09, a copy of which is attached hereto and which approved an amended Equity Management Plan was passed with Director Sullivan voting no.” (http://www.kiuc.coop/pdf/board/minutes-2009-0623-Special-Apprvd.PDF)
“June 24, 2009 ... Mr. Randall Hee ... R. W. Beck, Inc., is pleased to submit this final report on the 2009 Equity Management Plan for Kaua'i Island Utility Cooperative. This report sets forth and summarizes the methodology, assumptions and results of the 2009 Equity Management Plan analysis.” (KIUC DJB-207, page 5)
Life of the Land Analysis
We couldn’t find anything in the record that would indicate that KIUC and/or its Board did anything other than to decide to raise rates in light of the new paradigm of falling electrical demand.
Conclusion
We recognize that KIUC gives lip service to renewables while focusing on a fossil fuel / biofuel future. KIUC is intended to be member-driven but is actually creditor-driven, 85% of their capital comes from creditors while 15% come from members.
LOL believes in fairness. We believe that an updated rate design must occur, with emphasis on conservation, energy efficiency, renewable energy, inverted block rates, time of use rates, reduced rates for low income, and equity.
In order for this application to be complete, it must include an analysis of the due diligence performed on the alternatives.
In these challenging economic times, surely the RUS understands the situation that rural elect cooperatives are going through. Common sense and local values would lead us to ask for some relief from RUS first, before burdening already overburdened cooperative members.
In these tight times, KIUC should also considering delaying some capital projects and/or purchases and other belt tightening approaches including reducing overhead.
LOL is concerned that if we focus only on rate increases, more ratepayers may flee the system to install their own on-site energy systems. This could increase the burden on those remaining on the grid.
Furthermore, this regulatory docket needs to focus on what will keep KIUC whole during the next year or two while KIUC works on modernizing their rate design.
KIUC Request #1
Determine this Application to be a completed application, pursuant to HRS § 269-16, as amended, and HAR § 6-61-87;
Life of the Land Analysis
KIUC must amend this application to show how they performed due diligence.
KIUC Request #3
Find that KIUC's present rates and charges for its customers are unjust and unreasonable and will not allow KIUC to earn a sufficient level of revenues in order to ensure its ability to comply with its debt loan targets and covenants, meet its funding needs, and build sufficient equity to ensure its ongoing financial health and viability;
Life of the Land Analysis
This is a compound statement. KIUC may or may not have sufficient funds however KIUC needs to explore the various alternatives that are available.
KIUC Request #4
Approve, pursuant to HRS § 269-16, as amended, the rates and charges proposed by KIUC as set forth in Exhibit KIUC 5, together with the tariff changes resulting therefrom or set forth therein, and authorize KIUC to place into effect the proposed rates, charges and changes after the date of authorization by the Commission;
Life of the Land Analysis
KIUC must amend this application to show how they performed due diligence.
KIUC Request #5
Approve, pursuant to HRS § 269-16, as amended, and HAR § 6-60-6, the request to (a) modify KIUC's existing Energy Rate Adjustment Clause ("ERAC") to remove the efficiency component in the existing ERAC such that KIUC will recover only actual fuel and purchased power costs, and (b) rename it the Cost of Power Adjustment ("COPA");
Life of the Land Analysis
KIUC does not appear to have followed the law on the requirement to shape the ERAC / COPA into a mechanism to prod the utility into increasing the use of renewable energy.
We respectfully request that the Commission seriously consider the issues that we have raised.
Mahalo,
Henry Curtis
Vice President for Consumer Issues
Life of the Land
Attachment 1: KIUC Monthly Financial Reviews
Attachment 2: Net Income $M
Attachment 3: Changes in Demand from Previous Year
Attachment 4: KIUC SBH-801
Poisoning the Well
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![[Electricity Prices Plummet]](http://s.wsj.net/public/resources/images/P1-AR099A_POWER_NS_20090811181355.gif)
