Richard Ha writes:

Regarding the Aina Koa Pono (AKP) biofuel project, and despite its full-page newspaper ads, Hawaii Electric Light Company (HECO) has clearly shown that it does not have the public interest at heart.

The utility kept secret how much AKP would be paid – $200 per barrel – and manipulated that information to estimate that the average rate payer would pay $1 per month and make us feel like this was a small thing.

This is grossly unfair. There are many different ways HECO could have informed the public without compromising proprietary information. Instead, behind our backs, it was applying to pass through the cost of $200 per barrel oil.

It’s unconscionable to do this to the “rubbah slippah” folks.

Now, week after week, HECO continues to run its full page newspaper ads to wash our brains and tell us how much it is trying to lower our rates. Hmmmm.

This Friday, November 30, 2012, is the deadline to submit testimony to the PUC opposing the Aina Koa Pono project.

Email your letter to: hawaii.puc@hawaii.gov and reference this in the subject line: PUC Docket #2012-0185; Application for approval of biofuel supply contract with Aina Koa Pono.

Here’s the testimony I sent:

To: PUC <hawaii.puc@hawaii.gov>
Subject: PUC Docket #2012-0185; Application for approval of biofuel supply contract with Aina Koa Pono

Aloha Chair Morita and commissioners:

I am strongly against the AKP biofuel supply contract.

I am president of Hamakua Springs Country Farms, which is a family farming operation. We farm 600 fee simple acres of bananas and tomatoes at Pepe‘ekeo on the Big Island. We have more than 35 years of farming experience. I am a committee member of the Hawaii Clean Energy Steering Committee. I was co-chair of the Geothermal Working Group. I have attended four Association for the Study of Peak Oil conferences, so I have a fair understanding of energy issues.

My testimony relates to the effect that the AKP biofuel contract will have on my workers and on my farm, as well as on food security in general and the Big Island’s economy in particular.

The AKP/HECO fueling arrangement contemplates AKP being paid approximately $200 per barrel of biofuel. The $200 per barrel payment to AKP will begin in 2015, when AKP is anticipated to deliver the specified quality fuel. The contract will then last for 20 years. HECO points out that the rate subsidy will only begin when AKP delivers fuel, as if to say that there will be minimum economic effect on rate payers. Nothing could be further from the truth.

The AKP fuel purchase contract of 20 years precludes utilizing potentially lower cost alternatives. Geothermal, for example, is 11 cents per kilowatt hour less than oil for generating electricity. If geothermal were used instead of oil at the 60 MW Keahole plant, it would save $58 million annually compared to oil at today’s price. And oil today is nearly half the cost of AKP’s fuel oil at $200 per barrel.

It appears that the AKP contract tracks the AEO 2012 high price scenario instead of the reference case scenario. During the last few years, knowledgeable commentators such as Jeff Rubin point out that rising demand and rising oil prices contains the seed of its own destruction. The last four recessions, dating back to 1970, indicate that oil price spikes cause recessions. And recessions cause oil prices to fall back. Global economic growth is grinding to a halt when oil is close to $100 per barrel. So it is more prudent to follow the reference case of the EIA’s AEO 2012 oil price projection – instead of the high rate case oil price path that HECO chose.

The PUC should not approve as just and reasonable that the utility should be allowed to establish a Biofuel Surcharge provision that will allow the pass through of the cost differential to the consumer as well as the actual cost pass through itself.

Rate payers will subsidize the difference between the actual oil price and the $200 that AKP will be guaranteed for 20 years. It is more than possible that actual oil prices would be substantially below $200 for the whole contract period. That will result in a heavy subsidy that rate payers must bear. The $200 per barrel rate is much too high. And the cost differential that is anticipated to be passed through to the rate payer is unconscionable.

On the Big Island, electricity rates have been 25 percent higher than Oahu’s rate for as long as people can remember. It has contributed to the Big Island having one of the lowest median family incomes in the state and the attendant social problems that come with a struggling economy.

Rising electricity rates act like a regressive tax – the folks on the lowest rungs of the economic ladder suffer the most. But it is worse; as electricity prices rise, folks that can afford to leave the grid will do so, leaving the folks unable to leave to assume more of the grid infrastructure cost.

Oil price has quadrupled in the last ten years. People and businesses have made necessary adjustments, but there is just no more to cut. Farmers have cut back on employee benefits, and they have cut back on capital improvements to survive. But this is false economy; sooner or later, maintenance foregone will catch up. Farmers are especially vulnerable because they are price takers rather than price makers. It is our food security that is at stake.

Hawaiian farmers’ and food manufacturers’ main competition is U.S. mainland producers. Oil costs make up less than 2 percent of the electricity costs on the mainland. Oil is more than 70 percent of the cost of electricity in Hawa‘ii. Any mainland food product that has substantial cheap electricity costs imbedded in it becomes relatively more competitive to Hawai‘i products as oil prices rise. AKP’s price subsidy will make Hawai‘i food producers even less competitive to their mainland counterparts. Allowing cost differential pass through will threaten our food security.

Higher electricity costs from the AKP project will affect fresh food costs. Farmers, wholesalers and customers of locally gown food all pay for the electricity that it takes to maintain the “cold chain.” That raises food cost and takes away discretionary income from consumers. Consumer spending makes up two thirds of our economy. Allowing cost differential pass through threatens our economy.

Rising electricity rates act like a regressive tax – the folks on the lowest rungs of the economic ladder suffer the most. But it is worse: As electricity prices rise, folks that can afford to leave the grid will do so. This leaves the folks unable to leave to assume more of the grid infrastructure cost. These are the very people who are most affected by rising electricity rates. Allowing cost differential pass through is not in the public interest.

In this particular project, HECO has shown that it does not have the public interest at heart. Worse, it kept secret the $200 per barrel amount that AKP would be paid and then manipulated that information to come up with an estimate of $1 per month for the average rate payer. That was grossly unfair. Passing on the high biofuel cost to the rubbah slippah folks while making it seem that there would hardly be an effect is unconscionable. There were many different ways they could have informed the public without compromising proprietary information. Instead they chose this way. It speaks for itself.

Richard Ha

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