PUC, HECO presentations

Hawaii Public Utilities Commission

Factors Affecting Hawaii Electricity Rates
&
Historical Trends and Future Perspectives

Informational Briefing: Senate Committees on
Commerce & Consumer Protection and Energy & Environment
January 29, 2013

Why Are Electric Utilities Regulated?

The Regulatory Compact

The regulated company is protected from
competition within a designated service territory,
and in return, the regulated company is required
to provide service to all who need it within reason.
The services provided by the regulated company
are to be of good quality, safe, and reasonably
priced, and in return, the regulated company is
allowed the opportunity (not a guarantee) to earn
a “fair” rate of return for its investors.
2

Why Are Electricity Rates Going Up?

Fuel, O & M Expenses,
Cost of Utility Service Taxes, Depreciation,
Return on Investment
________________________________________________________

Efficiency Programs,
Electricity Sales Customer Sited
Generation, No or
Minimal Growth in
Customer Base,
Recessionary
Results in Conditions

Average Electricity Customer Rate

3

The Evolution of Hawaii’s Energy Policy and
Energy Resource Mix
Energy Efficiency
Portfolio
DSM-3% Standard-30%

Chapter 1 Hawaii Energy- Chapter 2
10%
Renewables-5%
Key Policy Drivers: Renewables-11% Additional Policy
RPS, PBF, NEM Drivers:
Renewables
EEPS, EPA and
Existing & New
GHG rules Projects
40%
Key Lessons: Key Goals:
Oil-80% • Early adoption of •Reduce/stabilize cost
technology Oil-76% of electricity
• Grow RE and EE •Diversify fossil fuel mix
sectors to meet emissions rules
• RE integration is •Continue RE and EE Fossil Fuels
possible growth 60%

•Expand tools to
integrate RE & increase
Coal-15% Coal-13% EE

2002 2011 2030 4

Driving & Implementing Energy Policy

Act 99,2012
Diversify,
optimize &
minimize the use
of fossil fuels
(60%)

INTEGRATION
Indigenous & Clean
Maximize utilization & efficiency of
all assets

Affordable & Dependable &
Efficient Secure

RPS EEPS
renewable resources (40%)
increase the use of
Diversify, optimize &

(30%)
Electricity use reduction

HRS 226-18

5

Hawaii’s Electricity Rates
Historical Trends and Future Perspectives

Discussion Topics

• Historical Electric Rate Trends

• Key Reasons for Recent Electric Rate Increases

• Customer Impacts

• Utility Financial Impacts

• Factors Affecting Future Electric Rate Levels

7

Average Electric Rate Level by County: 2011

Cents/kWh 42.0
40.2
35.5
14.4 17.2
29.1 11.0
Base Rates 7.4

25.8
24.5 24.8
Energy 21.7
Costs

HECO MECO HELCO KIUC
(Oahu) (Maui) (Hawaii) (Kauai)
Customers 297,000 68,000 81,000 36,000
Sales (GWh) 7,242 1,181 1,104 435
Capacity (MW) 1,786 290 287 122
Avg Use/Customer (kWh) 23,564 17,369 13,771 11,995
Distribution Lines (Miles) 2,294 1,500 3,212 781 8

HECO (Oahu) Electric Revenues: 2002 – September 2012

Cumulative
$ Millions Increase

$1,370

$1,135
220%

Energy Costs

Base Rates $235
70%

Electric sales declined 5% over 10-year period. Thus, all of
the cumulative revenue increase is due to rate increases. 9

HECO (Oahu) Energy Cost Revenues: 2002 – September 2012

$ Millions $/Barrel Cumulative
Increase
$1,135

$830
350%
Oil Price

Utility Fuel Costs

$305
IPP Power Costs
105%

Utility and IPP generation output remained essentially
unchanged over 10 years at a 60%/40% mix, respectively.
10

Average Power Supply Costs: HECO Companies vs Independent
Power Producers (Cents/kWh)

Power Supply
HECO MECO HELCO
Provider

Utility Generation (1) 24.8 28.1 32.1

IPP Generation (2) 18.0 17.1 23.9

1) Cost estimate based upon actual 2011 fuel cost, generation operation and maintenance expense, generation-related annual
depreciation expense, proration of utility net operating income related to generation net plant investment and fuel inventory plus
applicable income and revenue taxes divided by total utility generation output. Excludes any allocation of utility A&G expenses
such as power plant employee pension and benefits or property insurance expenses, etc.
2) Cost estimate based upon 2011 actual purchased power capacity and energy expense plus revenue taxes divided by total
electricity sold to utility.
11

HECO (Oahu) Base Rate Cost Drivers: 2002 – September 2012

Index
(2002 = 1.00)

O&M Expenses(1)
A&G Salaries
Average Base
Rates

Rate Base
Investment

Electric Sales

1) Additional amounts of O&M expenses were capitalized, rather than expensed, in 2011 and 2012 due to
accounting changes. Otherwise, O&M expense levels would have been higher in those two years.
12

Electric Utility Rate Cases and Awards: 2005 – 2012

HECO MECO HELCO Total KIUC

Number of Rate Cases 4 3 2 9 1

Cumulative Rate
Increases Requested 409 75 71 554 13
($ millions)
Cumulative Rate
Increases Granted 247 31 29 307 3
($ millions)

Increases Granted
As Percent of Request (1)
60% 41% 41% 55% 24%

Avg. Rate Case Duration(2)
(Months)
38 39 43 39 15

1) HECO Companies reached stipulated settlement with the Consumer Advocate in all cases, and, in the case of HECO (Oahu), the
Department of Defense. Settlements were approved by Public Utilities Commission as stipulated with minor adjustments on occasion.
2) Indicates the duration between filing date and date of final Commission order. Interim orders were issued the within statutory time
requirement. 13

Impact of Rate Increases on Average HECO (Oahu) Residential
Customer: 2002 – September 2012

Average Monthly Bill vs Average Monthly Usage

Bill ($) Usage (kWh)

Electricity Usage

Electric Bill

14

Average Monthly Residential Energy Use By County: 2002 – 2012

kWh

750
700
650
::::::---- ~
"--- ~
600
550
~ Maui
Oahu
.............
500 ~ Hawaii
- Kauai
450
400
2002 2004 2006 2008 2010 2012

15

Authorized vs Actual Rate of Return on Common Equity for
HECO (Oahu): 2002 – September 2012

Return on Average Common Equity
%

Authorized

Actual

16

Actual Rate of Return on Common Equity: 2002 – September 2012

%
12.00

10.00
HECO

8.00 HELCO
MECO
6.00

4.00

2.00
2002 2004 2006 2008 2010 2012

17

Potential Drivers of Future Rate Changes

 Annual decoupling and RAM rate adjustments; 3-year rate case cycle for HECO
Companies (Base Rates):
− Will HECO Companies implement their 5-year capital expenditure forecast of $2.6 – 3.0 billion which
represents a “7-9% rate base growth” per year?
− Will substantial increase in utility operation and maintenance expense during past decade continue?
− Will electrical sales reductions due to energy efficiency, conservation, solar hot water and PV
continue?
− Will HECO Companies restructure utility operations and implement significant cost improvements?

 Oil commodity prices (ECAC)
− Near-term changes in Asian LSFO market; potential restart of Japanese nuclear plants
− Hawaii refinery situation
− Existing curtailment of renewable energy resources on neighbor islands
− Ability to add new, cost competitive renewable energy resources

 Environmental compliance for existing utility fossil generation plants – either plant retrofits or fuel
switching to Ultra Low Sulfur Diesel (ULSD) would drive rate increases

 Utilization of LNG in remaining 60% of electric generation – potential opportunity for meaningful
fuel and environmental compliance cost reductions
18

Electric Utility Major Functions: Future Policy and Rate Implications

• Represents ≈ 75 - 80% of HECO Companies’ total
cost of service
• HECO Companies’ generation investment ≈ 30%
Power of its total rate base investment; hence only ≈ 30%
Generation of HECO Companies’ profits tied to generation
• Existing IPP generation is less expensive than
HECO Companies’ full generation costs
• Retirements of utility generation to accommodate
Utility lower cost renewable energy and fossil resources
Service

• Represents ≈ 20 - 25% of HECO Companies’ total
cost of service
Energy • HECO Companies’ T&D investment ≈ 70% of its
Delivery total rate base investment and hence ≈ 70% of
(T&D) HECO Companies’ profits
• Function where many technological advances are
occurring – smart meters, smart grid, storage, DC
cables, etc.
• Modernization of grid infrastructure is critical to
Hawaii’s ability to integrate greater amounts of
renewable energy
19

NEIL ABERCROMBIE
STATE OF HAWAII
KEALI`I S. LOPEZ
GOVERNOR OFFICE OF THE DIRECTOR DIRECTOR

SHAN S. TSUTSUI DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS JO ANN UCHIDA TAKEUCHI
LT. GOVERNOR DEPUTY DIRECTOR
335 MERCHANT STREET, ROOM 310
P.O. Box 541
HONOLULU, HAWAII 96809
Phone Number: 586-2850
Fax Number: 586-2856
www.hawaii.gov/dcca

TO THE SENATE COMMITTEES ON
COMMERCE AND CONSUMER PROTECTION
AND
ENERGY AND ENVIRONMENT

THE TWENTY-SEVENTH LEGISLATURE
REGULAR SESSION OF 2013

TUESDAY, JANUARY 29, 2013
8:30 A.M.

TESTIMONY OF JEFFREY T. ONO, EXECUTIVE DIRECTOR,
DIVISION OF CONSUMER ADVOCACY,
DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS,
TO THE HONORABLE ROSALYN H. BAKER
AND THE HONORABLE MIKE GABBARD, CHAIRS,
AND MEMBERS OF THE COMMITTEE

INFORMATIONAL BRIEFING

My name is Jeffrey T. Ono. I am the Executive Director for the Division of
Consumer Advocacy (“Consumer Advocate”) from the Department of Commerce and
Consumer Affairs. The following is my testimony for this informational briefing.

Hawaii consumers pay some of the highest electricity prices in the nation. The
State’s policymakers search for solutions, which are difficult to find, because so much of
the cost of electricity is driven by Hawaii’s dependence on imported foreign oil as the
primary source of electricity generation. The Consumer Advocate is committed to
renewable energy generation and energy efficiency as the principal means to move our
State toward a clean, sustainable energy future that isn’t reliant on foreign oil. In 2012,
when oil prices were once again on the rise with no end in sight, the argument for the

Informational Briefing
Senate Committee on Commerce and Consumer Protection
Senate Committee on Energy and Environment
Tuesday, January 29, 2013, 8:30 a.m.
Page 2

adoption of more and more renewable energy was not difficult. Today with stable oil
prices, the Consumer Advocate is concerned that the state will lose its momentum and
its commitment to all forms of renewable energy.

In the last quarter of 2012, Hawaii saw electricity rates decrease for all islands.
In January, 2013, rates on Oahu and Hawaii Island rose by approximately one cent per
kwh, but fell on Maui and Kaua’i. This overall slight decline in rates over the last four
months is due to the drop in oil prices.

In an interview with a Honolulu Star-Advertiser reporter, energy consultant
Professor Fereidun Fesharaki stated that his long-term price forecast for oil is $30 per
barrel less than it is today. He indicated that oil prices will start to decline by around
2015, going down to $80 per barrel, then staying at that level for a number of years. He
went so far as to say that oil prices may go even lower than that. Professor Fesharaki
offered similar opinions in his report on liquefied natural gas (“LNG”) that was
commissioned by Hawaii Natural Energy Institute (“HNEI”).

If oil prices decline as Dr. Fesharaki predicts, will State policymakers lose the
momentum toward renewable energy resources that may be priced higher than the cost
of generating electricity using oil? Will our concern for current electricity prices delay or
kill the adoption of renewable energy projects? Do we wait out the next five years and
stay the course using oil to generate electricity in the hope that oil prices will decline as
Dr. Fesharaki predicts?

We need to keep in mind that not every oil price forecaster is thinking that oil
prices will be declining. The Department of Energy in its Annual Energy Outlook
(“AEO”) predicts a steady rise in oil prices over the next 30 years. We cannot risk our
future by staying on what has been rising and volatile oil prices. We need to push
toward the state’s Renewable Portfolio Standards (“RPS”) and Energy Efficiency
Portfolio Standards (“EEPS”) goals.

The Consumer Advocate is not oblivious to the current economic hardships
Hawaii’s citizens are facing with the high cost of electricity. So what is the Consumer
Advocate doing to keep electricity prices down?

First, in every electric utility rate case, the Consumer Advocate scrutinizes every
expense item, every new employee, every pay raise. We retain one of the most well
respected consultants in the country – Utilitech, Inc.. We scrutinize each of the electric
utilities investments to determine if the utilities have sustained their burden of proving
that there is a net benefit to ratepayers in making the investment.

Page 3

Second, we will continue our fight to drive Power Purchase Agreement (“PPA”)
prices down. It has been a mystery as to why wind and solar PPA prices have not
dropped significantly as they have on the mainland. Why are Hawaii’s wind and solar
PPAs consistently priced at 20 cents per kwh when on the mainland we see prices that
are below 10 cents per kwh?

Third, we argue against indexed pricing for fuel supply contracts. For example,
in a recently approved biodiesel supply contract we expressed our concern over the
pricing term of the contract that was indexed to mainland biodiesel prices, because
mainland biodiesel prices tend to follow petroleum prices. Ultimately, for that particular
contract, we did not object to the pricing terms, because the term of the contract was for
a relatively short three years. We will continue our commitment to see PPA pricing at
fixed prices.

Fourth, we push for on-bill financing as a means of providing moderate to low
income households and renters access to the benefits of solar photovoltaic (“PV”)
systems that would lower monthly electricity bills and save on the amount of electricity
that has to be generated by the utility using oil. Energy efficiency should not be for the
wealthy only. There are too many homeowners in Hawaii who do not have the
necessary up front cash to pay for a PV system. A well-designed on-bill financing
program that allows consumers to pay for the installation of a solar pv system through
the electricity cost savings achieved by such a system is key to moving the state toward
greater distributed renewable energy generation by allowing greater public participation.

Fifth, although the Consumer Advocate understands the importance of
renewable energy projects, the Consumer Advocate will not ignore the potential cost
savings that might be achieved if the state moves toward LNG as a fuel source for
electricity generation. Thus far, the studies done by HNEI, HECO, and Hawaii Gas
indicate that LNG offers Hawaii consumers a very real opportunity to see lower
electricity rates. The technical, regulatory, and infrastructure challenges of LNG
importation to Hawaii are extremely difficult to assess. The Consumer Advocate will
take an active role in the regulatory assessment of LNG.

As a final point on the high cost of electricity in Hawaii, we cannot lose sight of
what the future holds for Hawaii’s consumers. We have to consider the long-term
effects of what we do and which projects are approved. We cannot reject renewable
energy projects simply because they cause an increase electricity bills today, if those
projects will result in stable prices that are lower than the Department of Energy’s
forecasted price of oil in the future. Furthermore, costs need to be balanced against the

Page 4

State’s goal of energy sustainability and independence; the electric utilities need to
provide reliable and safe service; the State’s need to create jobs and stimulate the
economy; the desire to have community acceptance over all projects; and the need to
maintain a clean and healthy environment.

Thank you for this opportunity to testify.

Fuel Expense Per Customer

$3,500 T - - - - - - - - - - - - - - - - - - - - - - -
I

$3,000 -+-1- - - - - - - - - - - - - - - - - - - - - -

$2,500 -j-- - -- -- - - -- - -- - -
I

$2,000 +1- -- - - - -- - - - - -- - . HECD
• AVISTA
DIDAHD
$1,500 -+-1- - - - - - - - - -
D PSCNM

$1,000 -+-- - - - -
1

$500

$0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Purchased Power Expense Per Customer

$2,000

$1,800

$1,600

.
$1,400

$1,200 1 .,.,.,
• • • • • II . HECO

$1,000 . --e--.--fll • III •
• • • • • II - AVISTA
o IDAHO
$800 I -

$600
- III _ II I _ llil _ II I _ II I _
- - I ID PSCNM

$400

$200

$0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Net Income Per Customer

$500 .-----------------------------------------------~

$450 T--------------------------------------~
I

$400 -1--
1 - - - - - - --1

$350

$300 . HECD
• AVISTA
$250
DIDAHD
$200 D PSCNM

$150

$100

$50

$0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Senate Committee on
Commerce and Consumer Protection
Senate Committee on
Energy and Environment
Tuesday
January 29, 2013

Oahu electric bill (as of 1/2013)

WHAT DOES YOUR HOW MUCH DO WE
MONEY PAY FOR? MAKE ON IT?

POWER FROM
INDEPENDENT PRODUCERS
0%
22 %

FUEL OIL
0%
40 %

OPERATIONS, CUSTOMER
SERVICE, DEPRECIATION, 0%
ADMINISTRATIVE, INTEREST
AND ENERGY EFFICIENCY
PROGRAM COSTS

26 %
TAXES 0%
10 %
NET INCOME 2 %

2

Hawaii Island electric bill (as of 1/2013)


POWER FROM
0%
30 %

FUEL OIL
0%
28 %

SERVICE, DEPRECIATION,
AND ENERGY EFFICIENCY 0%
PROGRAM COSTS

28 %

TAXES

11 % 0%
NET INCOME 3 %

3

Maui electric bill (as of 1/2013)

POWER FROM
0%
12 %

FUEL OIL

50 % 0%

SERVICE, DEPRECIATION,
AND ENERGY EFFICIENCY 0%
PROGRAM COSTS
25 %

TAXES
9% 0%
NET INCOME 4 %

4

HawaIIan Electric Company Account Number. Service Address ~, 01 2
PO Box 3978 202004062933 1234 OAHU ST
Honolulu. HI 96812-3978 Invoice Number: Contract:
600001780 32427071

s.. BII ~~~~~!,~~M=~form.1on1 MESSAGES
Service Period
Previous Balanoa
OJI02J12
$218.43
- 04102112 C.'ebrate Earth Day and plant a native tTve. Trws
abaorb C02 which can help In theflght ag.'Mt global
Fuel and Purchased Power
Paymen~ $216.43· wannlng.
OUTSTANDING BALANCE

Current Charges $203.76
$tI.OO e.l.brlll. Earth Day iIInd plant. nativ. tree. Trau
absOf'b C02 wtlleh ean '*p In the flgtl1l1GlIlMt global
warming.
make up $126.50 of this $203.76
$0.00
Adjustments
Cu".nt Chclrgn
TOTAL AMOUNT DUE 0412312012
:~03.7e
203.76
bill example.
~~lfN~l",.;~=~ uU"T~E
'Rro:srn:' "QjRR~~EAOINO
t.1~=32&7~ KWH "
PR~~ING ""'00 , -.00:00
,. ,
A '" _
.- ,~c"~.~ ""'"!.' ..- ~~.~t.KMI"X~~~;'~~ __ ... I
V
G "
"
K
w "
" Hawaiian Electric Company Service Address Page 2 of 2
,
H

, " PO Box 3978 1234 OAHU ST
• ,
"
0
, • Honolulu, HI 96812-3978 Contract:
A
,
o t.1t.1J JASONDJ FUA
32427071
"" """"" ""

CURRENT CHARGES
Electric Service R Residential Service
Customer Challle $8.00
Base Fuel EncrQ $54.42
Non Fuel EnerQV $47.88
Enemv Cost AdhJ<lmen! $69.21
IRP Cost Recovery $0.21
PBF SurcharQe $4.06
Purchased Power Adiuslment $15.20
Interim Increase 2011 $4.78
Total for Current Charges $203.76

Hawaiian Electric Company
Maui Electric Company
Hawaii Electric Light Company
5

Historical Fuel Prices
Low Sulfur Fuel Oil vs. Crude Oil
December 2010 to December 2012

Price per
BBL HAWAII OIL PRICES

CRUDE OIL PRICES

Hawaii oil prices based on Hawaiian Electric low sulfur fuel oil inventory prices

6

Customers are paying more, due to
increases in oil prices
2009 vs. 2011 ¢/kwh
9.5¢ of 10.1¢ increase due to
increases in oil prices

Increase due to:
Fuel 6.4 ¢
Purchased Power 2.2 ¢
Revenue Taxes .9 ¢
9.5 ¢

7

2011 Consolidated Taxes
to State and County
3%

• Revenue Taxes $264M
• GET on Fuel & PP $58M
• Income Taxes $lOM
______
$332M

8

Ratemaking Formula

RR = O + T + D + r (RB)
Where: RR = Revenue Requirements
O = Operations & Maintenance Expense
T = Tax Expense
D = Depreciation Expense
r = Rate of Return on Rate Base
RB = Rate Base

9

Lowering customer bills
(2008 Clean Energy Agreement)

Short Term Long Term
ALL CUSTOMERS

Renewable Energy
esp. larger scale projects
esp. wind
Inter-island cable

Feed-inTariff to replace net metering Energy Efficiency Portfolio Standard
Avoided cost contract renegotiation

Energy Efficiency EVs on a large scale
SELF-SELECTING

Demand Response/Load Management
CUSTOMERS

Solar Water Heating
PV/NEM
Time-of-use Rates
Lifeline Rates
Electric Vehicle (EV) Tariff

10

(New Day Plan)

ALL CUSTOMERS

Renewable Energy
esp. wind, geothermal, biofuels,
biomass, and OTEC
Inter-island cable
Avoided cost contract renegotiation Energy Efficiency Portfolio Standard
Statewide Rates (for Neighbor Islands)

SELF-SELECTING

CUSTOMERS

On-Bill financing of solar water heating
PV/NEM
Time-of-use Rates
Lifeline Rates

11

(2012 and onwards)


Rethink bidding process
ALL CUSTOMERS

Renewable Energy
Waivers from bidding by price
Direct investment on renewables
esp. wind, geothermal, biofuels,
Black pellets
biomass, and OTEC
Avoided cost contract LNG to selected units in
LNG
renegotiation ISO containers
Inter-island cable
Refinancing debt Consolidation of companies
Energy Efficiency Portfolio Standard
O&M to capital Unit retirements
Statewide Rates (for Neighbor Islands)
Operational efficiencies Review of FIT rates

SELF-SELECTING

CUSTOMERS

On-Bill financing of solar water heating
PV/NEM
Time-of-use Rates
Lifeline Rates
Bill payment options
Pre-paid meters
12

Percent Renewable Generation - 2012
Oahu Hawaii Maui County __.....--'""~~O~
1%

Consolidated

This is based on • RE Generation
system net
generation and the • Fossil Generation
REdoes not (Uti lity)
include self-
generation. • Fossil Generation (Non -
Utility - hatched)

13

Hawaii’s Renewable Energy Story
Chapter Hawaii Electric Light Maui Electric Hawaiian Electric

The Plantation [HCPC] [HC&S]
Chapter

The PURPA Wailuku River Hydro HC&S H-Power
Chapter PGV Makila Hydro
(Avoided Cost Tawhiri
Contracts) HRD
KWP I
“Grandfathered Projects” CIP CT1
Avoided Cost Ends
Honua
KWP II Kahuku Wind
Sempra Wind (OTEC International)
The “Exempt/Waivered”
Competitive PGV+8 La Ola H-Power + 27
Bidding (Hu Honua)
Chapter “2008 Oahu Bid”
Sunpower
Kawailoa
(Lanai)
“2010 Biofuels Bid”
(AKP) (HBE)

200MW Oahu
50MW Geothermal Bid 30MW Firm Bid 200MW Firm Bid

14

Cost ($/kWh)
o o o o o o o o
o o ~ ~
N N w w
o (J1 o (J1 o (J1 o (J1

HECO generation (Average)

HECO generalion (Marginal)

Cost of Generation - Oahu
PPA 1 - Waste-Io-Energ y

PPA2 - Oil
m
x PPA3- Coal
~

~
".
<D PPA4 - W nd
'U
-u PPA7 - PV
'"
PPAB - PV

PPA9 - W nd
::I:S:::I:
I» I» I»
:e
I» c: I» m
_. :e
::::J -u PPA5 - Biomass
=: m =: .., '"
tD -u
miDI» (Q ~
-0::::J '< - PPA6- PV
ID-
n ~. m <nil_
0:>-
S:°lll .., '"
00 _
c:
FIT Tier 1 - W nd
n
r o:::!·
_. 3 0 tD
FIT Tier 2 - W nd
(Q 'C 0
;rI»O FIT Tier 3 - W nd
0::::J3
o'<'C FIT Tier 1 - PV
I»
3 ::::J
'C '< FIT Tier 2 - PV
I»
::::J
'< FIT Tier 3 - PV
-n

-
=1
z
m
s:
FIT Tier 1 - Hydro

FIT Tier 2 - Hydro

FIT Ti er 1 - CSP

FIT Ti er 2 - CSP

FIT Ti er 3 - CSP

Comm ercial NEM

Residential N EM
15

Cost ($/kWh)

Cost of Generation – Hawaii Island
o o o o o o o o o
o o ~ ~
N N w w ~
o <.n o <.n o <.n o <.n o

HELCO generation (Average)

HELCO generation (Marginal

PPA 1 - IMnd OJ
OJ
00
PPA2 - Geothermal CD
c..

~
PPA3 - Geothermal
o
PPA4 - Geotherm al :::l
m
x
§:
,," PPA5- Oil
o
CD
<0 (')
PPA6- Hydro CD
"
" 3
::I:S:::I: '"
'" PPA7 - IMnd
III III III 0-
~ :, :e PPA8 - Sotar CD
-.
=: m !!!, N
m - iii' m Oth er « 100 kW)
o
iD~::::J ::::J -->.
n:::-m ~ ------------------~ N
s: n' 1Il
no-
~
'< FIT Ti er 1 - IMnd "Tl
c
r o:::!, 00 FIT Ti er 2 - IMnd CD
cO' 3 n o
~
::::J" 'C 0 n FIT Tier 1 - PV "'U
_1110 ~
:::::! .
(')
0::::J3 FIT Tier 2 - PV
0'<'C CD
00
3 III FIT Tier 3 - PV
'C
III
::::J
'< "T1
FIT Tier 1 - Hyd ro
0'
-.
~ ~
m I
FIT Tier 2 - Hydro
'5::
m
r
FIT Tier 1 - CSP
o
FIT Tier 2 - CSP
o
FIT Tier 3 - CSP

Commercial NEM

Residential NEM
Z
<1> _
<0"
2."
Qi. Ul PPA9 - Biomass
5-::;-
"
'"
16

Cost ($/kWh)
o o o o o o o o o
o o ~ ~ iv N w w ~
o (J1 o (J1 o (J1 o (J1 o
M EGa Maui generation
(Average)

Cost of Generation - Maui
M EGa Maui generation
(Marginal)

PPA 1 - Biomass

~
m PPA2 - W nd
x
§:
s·
PPA3 - Wnd
'"
"1J
"1J
U>
PPA4 - Wnd
::I:S:::I:
I» I» I»
:e
I» :e
c: I»
_.
=: m =:
miDI» m FIT Tier 1 - W nd
-0::::1 ::::I
11)
ID-m
n ~. _ ....
(Q FIT Tier 2 - W nd
S:°lll
00_
'<
C/I
r O:::!·
_. 3 0
0
c:
FIT Tier 1 - PV

CC 'C 0
....
n
;rI»O 11) FIT Tier 2 - PV
0::::13
O'<'C FIT Tier 3 - PV
I»
3 ::::I
'C '<
I»
::::I "
:::; FIT Tier 1 - Hydro
'< z
m
;;: FIT Tier 2 - Hyd ro

FIT Tier 1 - CSP

FIT Tier 2 - CSP

FIT Tier 3 - CSP

Commercial N EM

Re"derlial N EM
17

Monthly Savings with Wind
- Maui Residential

18

Hawaiian Electric Consolidated
Cumulative PV Capacity Addition
180
171.3
160
Cumulative PV Capacity, MW
140

120

100
78.5
80

60
40.2
40
24.0
20 11.5
1.8 2.4 4.7
0
2005 2006 2007 2008 2009 2010 2011 2012*
* 2012 total is preliminary

19

Impact of Solar on Grid Load
Hawaii Electric Light Load Curve
System load Curve with lS.l MW PV
June 7, 2012
180 ,---------------------------------------------------

170 - Load+PV
- Net Sys_Load
160 +-------------------~~~~~------_7~~----------

~150 +-----------------~~~~----~--------_4~--------

3:
~140 +-______________~L---------------------~--------
"C
1"11
0130
..... +----------------{--------------------------- -------

~
... 120 +--------------+-------------------------------+------
'"
>
Vl 110 +-------------1--------------------------------------

100 +---~----_.~--------------------------------------

90 +---------------------------------------------------

80 r---,-_,--_,---,--,---,-_,~_,--_,--,,--,_--,__,--_,

<1'S8 0.'00 <'01 <1:0J <S:'OS ~'06 10.'08 1<"10 1<f."11 1<S:"1J 1~"1S <0."16 «"18 0.<0 « I

Time

20

HELCO’s “Loading Order” - Day
Customer Load
Conservation / Energy Efficiency
Solar PV (NEM, T 1/2 FIT, SIA) – 24 MW
Waiau & Puueo Hydro - 4.1MW
Megawatts Power

Tawhiri Wind – 7 MW
Wailuku River Hydro – 12.1 MW
PGV Geothermal – 22 MW
HRD Wind – 10.5 MW
Tawhiri Wind – 13.5 MW
Keahole Solar CSP – 1 MW
PGV Geothermal – 16MW
Hu Honua Biomass– 34 MW
Hill & Puna Steam – 25 MW
Keahole – 58 MW
Keahole AKP biodiesel
HEP – 60 MW
Diesels – ~56 MW 21

HELCO’s “Loading Order” - Night

Customer Load
Megawatts Power

Hu Honua Biomass– 34 MW
Keahole – 58 MW
Keahole AKP biodiesel
HEP – 60 MW
Diesels – ~56 MW
22

How does the Loading Order work
as customer load decreases?
Customer Load
Solar PV (NEM, T 1/2 FIT, SIA) – 24 MW
Megawatts Power

Hu Honua Biomass – 25 MW
Keahole – 58 MW
HEP – 60 MW
23
Diesels – ~56 MW

HELCO’s “Cost Order” (Jan 2013)

Cost of Each Resource
(highest to lowest cost)
Hu Honua Biomass – 25 MW
Keahole – 58 MW
Solar PV (T 1/2 FIT) – 1 MW
Avoided Cost Rates
HEP – 60 MW
Diesels – ~56 MW
Solar PV (NEM) – 20 MW 24

Traditional Utility Model

• (Still in place in many jurisdictions)
• Utility makes money by increasing electricity sales
• Discourages promotion of energy conservation
and energy efficiency initiatives
• Discourages customer self-generation,
such as NEM PV

25

Vision for Hawaii’s Energy Future

• Increase energy efficiency for homes and businesses
• Promote energy conservation to the fullest
• Support for cost-effective renewables:
geothermal, hydro, PV, wind, ocean thermal, wave
energy, concentrated solar, waste-to-energy, biomass
• LNG replaces oil

26

Challenges of Old Utility Model
vs Hawaii’s Energy Future

• Vision of Hawaii’s energy future does not reduce the
utility’s workload. If anything, it increases it.
– Two-way power will require new sophisticated systems
as well as upgrades to the existing system
– Operational issues become much more complex
and increase costs
– Demand for a smarter grid
– Legacy assets must be maintained or modified
for new use
– Increased customer demand for information and services

27

Decoupling

• Decoupling bridges the gap between the old utility model
with the new Hawaii model
• Overall system costs should decline
– Use less oil and substitute it with cheaper renewable energy and
LNG, and reduce company generation (60% of customer bills is
fuel and purchased power related)
• In the short term
– Hawaiian Electric’s operating costs will increase as we transition
to this new operating environment
– Decoupling assists in bridging declining sales and
operating costs
– Overall decoupling should reduce customer bills

28

Maui Electric costs have increased while
sales base has fallen to 2002 levels
GWH Sales Non-Fuel Operations & Maintenance Expense
1,300 $70 $65
1,280
1,266

1,248
1,252 $60 $55 $57
1,250 1,239 $51 $50
$50
1,207
1,200 $39 $41
1,192 1,192
1,181 $40 $37 $38
$34 $34
1,159
1,150
$30
1,134

$20
1,100
$10

1,050 $0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

29

Residential customers’ average
monthly consumption of electricity
750
Maui 717
700 707
654
650 651 Oahu
600 595
558 576
550 561
Hawaii Island
508
500
kWh/mo.

497
452 455 Lanai
450
436 423
400

350 Molokai 346
300
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

30

Progress on renewables
Over the next three years, nearly 37 megawatts of power generated by renewable resources will come on

line on Kaua‘ That’ in addition to 1 megawatts already in production from hydroelectric generation
i. s 4

and customers’photovoltaic systems.

By 2 1 , half of Kaua‘ s daytime energy needs will be met by solar PV the highest percentage of solar PV
0 5 i’ ,

on an electrical grid of any utility in the U. .
S

Details of projects in 2013:
At Anahola, KI
UC, in partnership with the Department of Hawai‘
ian Home Lands and the Homestead

Community Development Corp.is building a 1
, 2 megawatt, $ 0 million solar energy park This proj
5 . ect

will also include a service center and baseyard.150 construction jobs

KI
UC will build a 12 megawatt solar proj
ect near the old Koloa M ill on land leased from Grove Farm.This

$ 0 million proj
4 ect will produce nearly 6 percent of Kaua‘ s energy needs.
i’ 125 construction jobs

Green Energy Team of Kaua‘ is building a $ 0 million power plant that will burn woodchips from locally
i 9

grown trees.The plant will replace nearly 3. million gallons of oil now imported by KI
7 UC.200

construction jobs,39 perm anent jobs

About hydro:
W e’ talk
re ing to residents, water users and state agencies on a variety of proj
ects. ven if only half of our
E

proposed sites are built, they represent another 1 megawatts of firm, clean power.
5

Kaua‘ renew ables scorecard
i
Existing resources MW 2012 sales%

KI
UC W aiahi Hydro 13
. 18
.

M cBryde, W ainiha & Kalaheo Hydro 48
. 50
.

Gay & Robinson Olokele Hydro 10
. 12
.

ADC/KAA W aimea, Kekaha Hydro 15
. 13
.

Kapaa Solar 10
. 04
.

Customer solar 40
. 16
.

Total 13.
6 11.
3

Under construction/developm ent

Alexander & Baldwin Solar 60
. 27
. On line by December 2 1
0 2

KI
UC/Grove Farm, Koloa 1 .
20 50
. Set for completion 2 1
0 4

KI
UC/HCDC/DHHL Solar, Anahola 1 .
20 51
. Set for completion 2 1
0 4

Green Energy biomass, Koloa 67
. 1 .
10 Set for completion 2 1
0 4

Total by end of 2014 36.
7 23.
8%

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