Hawaii PUC Decision and Order No. 34696, July 14, 1017

BEFO RE THE PUBLIC UTILITIES CO M M ISSIO N
O F THE STATE O F HAW AII
In the M atter of
PUBLIC UTILITIES CO M M ISSIO N )
)
Instituting a Proceeding to )
Review the Power Supply )
Im provem ent Plans for Hawaiian )
Electric Com pany, Inc., Hawaii )
Electric Light Com pany, Inc., and)
M aui Electric Com pany, Lim ited. )
)
DECISION AND ORDER NO.
DOCKET NO. 2014-0183
3 4 6 9 6
“W
czo c :j
oi—
— c:-H
o —
n
■D
'n
m

TABLE O F CO NTENTS
I. INTRO DUCTIO N....................................................................................................2
II. BACKGROUND AND PRO CEDURAL HISTO RY .................................................... 5
III. THE REPO RT........................................................................................................9
IV. STATEM ENTS O F PO SITIO N............................................................................11
A. Im provem ents O ver Prior PSIP Filings...................................12
B. Future Resource Procurem ent ..................................................... 14
C. Recom m endations for Future Planning ................................... 15
D. Proposed New Fossil Fuel G eneration.....................................17
E. M odeling Process and Assum ptions .......................................... 19
F. DER .........................................................................................................21
G . Custom er BillIm pacts....................................................................22
V. DISCUSSIO N..................................................................;..............................23
A. O verview ................................................................................................23
B. High Priority Near-Term Actions ............................................ 27
1. C om petitive Procurem ent of G rid-Scale
Renewable Resources ............................................................. 27
2. Actions Related to CBRE and DER Integration ......... 29
3. System -Level G rid R eliability Projects .................... 31
C. Com m ission Concerns w ith the R eport.....................................32
1. Custom er Rate and BillIm pacts.......................................33
2. New Conventional G eneration Resources ...................... 35
3. BESS and Synchronous Condensers .....................................37
4. Transm ission System Projects .......................................... 39

Topics Requiring Further Analysis..............................................41
1. Achieving RPS G oals..........................................................41
2. M olokai and Lanai Advanced 100% Renewable
Energy Plans ...................................................................... 42
3. System Security Requirem ents ...................................... 43
E. Expectations for Im plem entation ........................................ 45
F. Future Planning Activities .................................................. 48
O RDERS................ 50

BEFO RE THE PUBLIC UTILITIES CO M M ISSIO N
OF THE STATE O F HAW AII
In the M atter of
PUBLIC UTILITIES CO M M ISSIO N Docket No. 2014-0183
O rder No.3 4 6 9 6
)
)
Instituting a Proceeding to )
Review the Power Supply )
Im provem ent Plans for Hawaiian )
Electric Com pany, Inc., Hawaii )
Electric Light Com pany, Inc., and)
M aui Electric Com pany, Lim ited. )
)
DECISIO N AND ORDER
By this D ecision and O rder, and subject to the conditions
set forth herein, the State of Hawaii Public U tilities Com m ission
("com m ission") accepts the Hawaiian Electric Com panies'
PSIPs Update Report ("R eport"),^ provides guidance regarding
im plem entation and future planning activities, and closes
this docket.2
^"The Hawaiian Electric Com panies' PSIPs Update Report,
Filed Decem ber 23, 2016, Books 1-4," filed on Decem ber 23, 2016 in
the instant docket.
2The Parties to this docket are: (1) Hawaiian Electric Com pany,
Inc. ("HECO "), Hawaii Electric Light Com pany, Inc. ("HELCO "),
and M aui Electric Com pany, Lim ited ("M ECO "), (collectively,
the "HECO Com panies" or the "Com panies"); (2) the Consum er
Advocate, an ^ officio party to this proceeding, pursuant to
Hawaii Revised Statutes ("HRS") § 269-51 and Hawaii Adm inistrative
Rules ("HAR") § 6-61-62(a); the Intervenors, pursuant to

I.
INTRO DUCTIO N
O n August 1, 2014, the com m ission instituted this
proceeding to review the power supply im provem ent plans ("PSIPs")
filed by Hawaiian Electric Com pany, Inc. ("HECO ")» Hawaii Electric
Light Com pany, Inc. ("HELCO "), and M aui Electric Com pany, Lim ited
("M ECO ") (collectively, the "HECO Com panies" or "Com panies").
By this order, the com m ission accepts the Report and provides
guidance for im plem enting the near-term actions identified in
the PSIPs.
The Com panies' near-term action plans and long-range
analysis provide useful context for evaluating pending and future
operational decisions and resource acquisition alternatives.
O rder No. 33320 at 175: (3) the County of M aui ("CO M ");
(4) the Departm ent of Business, Econom ic Developm ent, and Tourism
("DBEDT"); and (5) the County of H aw ai'i ("CO H"); the Participants,
pursuant to O rder No. 33320 at 175: (6) Renewable Energy Action
C oalition of Hawaii, Inc. ("REACH"); (7) Life of the Land ("LO L");
(8) HawaiiSolar Energy Association ("HSEA") ; (9) Puna Pono Alliance
("Puna Pono"); (10) The Alliance for Solar Choice ("TASC");
(11) Hawaii Renewable Energy Alliance ("HREA"); (12) The G as
Com pany, LLC, dba Hawaii G as ("Hawaii G as"); (13) AES Hawaii, Inc.
("AES"}; (14) Blue Planet Foundation ("Blue Planet");
(15) Ulupono Initiative LLC ("Ulupono"); (16) Hawaii PV C oalition
("HPVC"); (17) Sierra Club; (18) Taw hiri Power LLC ("Taw hiri");
(19) SunPower C orporation ("SunPower"); (20) Paniolo Power Com pany,
LLC ("Paniolo"); (21) Eurus Energy Am erica C orporation;
(22) First W ind H oldings, LLC; and (23) the D istributed Energy
Resources C ouncil of Hawaii ("DERC") (adm itted as a Participant in
O rder No. 33388, filed on Decem ber 11, 2015 in this docket).
Except as specifically otherw ise noted, the use of the term
"Parties" in this O rder refers, collectively, to the Parties and
the Participants.
2014-0183 2

The com m ission is confident that m any of the Com panies' proposed
near-term actions pertaining to renewable energy developm ent are
supported by sound analysis and are consistent w ith State energy
policy and prior com m ission orders.
These proposed actions include com pany-wide plans for
com petitive procurem ent of grid scale renewable resources;
successful im plem entation of the com m unity-based renewable energy
program ("CBRE"), dem and response ("DR"), and distributed energy
resource ("DER") program s; and certain utility actions to im prove
the reliability of each island grid. The com m ission now expects
the Com panies to advance these elem ents of the near-term action
plans, and offers further guidance on these elem ents in
Section V.B., below.
The com m ission also finds that certain projects in the
near-term action plans are not sufficiently justified by the
analysis in the Report. These projects include certain proposed
conventional generation plants, utility-ow ned battery energy
storage system s ("BESS"), proposed synchronous condensers,
and certain proposed transm ission projects. The com m ission w ill
require further analysis, including thorough analysis of
alternatives, during review of capital expenditures and
any applications for these projects. Section V.C ., below,
contains further guidance related to these proposed projects.
The com m ission expects the Com panies to continuously im prove and
2014-0183 3

refine their resource planning tools and m ethods, and em ploy these
tools to support appropriate com petitive procurem ent processes and
project applications in the near term .
O verall, the com m ission finds significant im provem ents in
the Report over the previous PSIPs filed in this docket.
The Com panies have expanded the scope of theiranalysis, and engaged
new planning tools to better address the substantial planning
challenges they face. Com pared to prior filings, the Report is
m ore transparent, incorporates additional stakeholder input,
and addresses several of the com m ission's previously stated
concerns regarding analysis.
In addition, the high-quality stakeholder input
throughout this proceeding has im proved both the planning process
and the resulting plans. The com m ission appreciates the significant
effort expended by all Parties, whose continued engagem ent and
respectful dialogue have m arkedly im proved the results.
Subject to the conditions and guidance set forth in this
O rder, the com m ission accepts the Report, including the near-term
action plans, and directs the Com panies to focus their efforts on
im plem enting these plans. The com m ission w ill use the Report to
provide context for furtherconsideration and analysis in the review
of subsequent com petitive procurem ent processes and applications
2014-0183

for approval of specific resources, projects, and contracts,
as appropriate.^
II.
BACKGROUND AND PRO CEDURAL HISTO RY^
O n April28, 2014, the com m ission issued four O rders^ that
collectively provided broad guidance on electric utility planning
and operations, including instructions to the HECO Com panies to
develop and file PSIPs, and the initialrequirem ents that the PSIPs
should address.® In addition, the com m ission m ade clear that the
PSIPs should incorporate the guidance set forth in the Commission's
Inclinations on the Future of Hawaii's Electric Utilities
3See O rder No. 33877 at 14; O rder No. 33320 at 2.
“*A m ore exhaustive procedural history of this docket is
provided in O rder No. 33877 at 6-9.
®See In re Public U til. Com m 'n, Docket No. 2012-0036,
D ecision and O rder No. 32052, filed April 28, 2014
("O rder No. 32052"); In_____rePublic_____U til.Com m 'n,
Docket No. 2011-0206, D ecision and O rder No. 32053, filed on
April 28, 2014 ("O rder No. 32053"); In re Public U til. Com m 'n,
Docket No. 2007-0341, O rder No. 32054 "Policy Statem ent
and O rder Regarding Dem and Response Program s," filed on
April 28, 2014 ("O rder No. 32054"); and In re Public U til. Com m 'n,
April28, 2014 ("O rder No. 32055").
®O rder No. 32055 at 87-93; In re Hawaii Elec.Light Co.,
Decem ber 20, 2013, at 113-121; and O rder No. 32053, at 68-69.
2014-0183

("Com m ission's Inclinations"),"^ which detailed the com m ission's
broader perspectives on aligning the HECO Com panies' investm ents
and business m odel w ith custom er needs and the State's public
policy goals.
O n August 7, 2014, the com m ission opened this docket to
consolidate the review of the PSIPs filed by the HECO Com panies.®
In describing the purpose of the PSIPs, the com m ission stated:
The PSIPs are to include actionable strategies
and im plem entation plans to expeditiously
retire older, less-efficient fossilgeneration,
reduce m ust-run generation, increase generation
flexibility, and adopt new technologies such as
dem and response and energy storage for
ancillary services, and institute operational
practice changes, as appropriate, to enable
integration of a diverse portfolio of
additionallow cost renewable energy resources,
reduction of energy costs and im provem ents in
generation operational efficiencies.®
O n Novem ber 4, 2015, the com m ission issued
O rder No. 33320, in response to the PSIPs filed by the
HECO Com panies on August 26, 2014. The com m ission identified
eight observations and concerns ("O bservations and Concerns"
regarding those PSIPs and provided the follow ing initialstatem ent
^O rder No. 32052, Exhibit A.
®In re Public U til. Com m 'n, Docket No. 2014-0183, D ecision and
O rder No. 32257 ("O rder No. 32257"), filed on August 7, 2014, at 1.
®O rder No. 32052 at 72-73.
loO rder No. 33320 at 3-7.
2014-0183 6

of issues ("Initial Statem ent of Issues") for the review ,
supplem entation, am endm ent, and update of the PSIPs:
1. W hether the PSIPs, as am ended and updated in
this proceeding, provide useful context
and m eaningful analysis to inform m ajor
resource acquisition and system operation
decisions and identify w ell-reasoned and
adequately-supported plans and actions that
w ill result in reliable energy services,
m eeting State clean energy requirem ents,
w hile ensuring that costs and rates w ill
be reasonable.
2. W hether the PSIP foreach ofthe HECO Com panies,
as am ended and updated in this proceeding,
includes reasonable plan com ponents as required
for HECO in O rder No. 32053, including:
a. a Fossil G eneration Retirem ent Plan;
b. a G eneration Flexibility Plan;
c. a M ust-Run G eneration Reduction Plan;
d. an Environm ental Com pliance Plan;
e. a Key G enerator U tilization Plan;
f. an O ptim al Renewable Energy Portfolio
Plan; and
g. a G eneration Com m itm ent and Econom ic
D ispatch Review.
3. W hether the PSIPs, as am ended and
updated, adequately address the O bservations
and Concerns . . .
i^Order No. 33320 at 138-139
2014-0183

In response to O rder No. 33320, on April 1, 2016,
the HECO Com panies filed their PSIP Update w ith the com m ission.
O n June 3, 2016, the com m ission solicited com m ents on the
PSIP Update. The com m ission particularly sought com m ents
regarding the InitialStatem ent of Issues, and "specific procedural
steps the com m ission should consider to ensure constructive further
progress in this docket.
O rder No. 33877 established the procedural schedule for
the rem ainder of this docket. O n August 26, 2016, the Com panies
filed a m otion for clarification of O rder No. 33877.
N otw ithstanding the Com panies" m otion, pursuant to O rder No. 33877:
(1) on Septem ber 7, 2016 the Com panies filed a work plan detailing
their analyticalapproach and the necessary steps to finalize their
^^The HECO Com panies hosted public m eetings to discuss
the PSIP Update w ith interested stakeholders on M ay 17, 2016,
and June 29, 2016.
i3in Public U til. Com m 'n, Docket No. 2014-0183,
O rder No. 33740 {"O rder No. 33740"), filed June 3, 2016, at 4-5.
i^O rder No. 33740 at 4.
^^"Hawaiian Electric Com panies M otion for C larification of
O rder No. 33877" ("M otion for C larification"), filed on
August 26, 2016. By their M otion for C larification, the Com panies
seek clarification regarding the focus and scope of the plans,
the analysis the com m ission requires, and confirm ation that its
proposed approach to com pleting its work in this docket is
consistent w ith the com m ission's prior orders. Because the
com m ission is accepting the Report and is closing this docket,
the M otion for C larification is now m oot.
2014-0183

PSIPs; (2) on Septem ber 21, 2016 and again on O ctober 3, 2016,
the com m ission held technical conferences, prior to each of which,
the Parties subm itted questions to be asked at the technical
conferences; (3) on Decem ber 23, 2016, the Com panies filed the
R eport; (4) the Parties filed their inform ation requests {"IR s")
and responses thereto; and (5) the Parties filed their statem ents
of positions ("SO Ps") .
III.
THE REPORT
The Report includes an executive sum m ary, seven chapters,
and seventeen appendices.According to the Com panies, the Report
outlines "a detailed plan charting the specific actions for the
years 2017 through 2021 to accelerate the achievem ent of H aw aii's
100 percent Renewable Portfolio Standard {"RPS") by 2045."^®
The Report details the analyses and procedures the Com panies used
to determ ine several alternative long range resource plans and,
ultim ately, the specific actions in the near-term action plans.
^®0rder No. 33877 at 6-9.
^ ^The Com panies also provided additionalvolum inous supporting
data on an internet site accessible to the com m ission and Parties.
i®Report at ES-1.
2014-0183

The Report explains how the Com panies developed their
candidate long-range plans, utilizing several optim ization m odels,
including four candidate plans for the Island of O ahu, and two plans
each for the Islands of M aui and Hawaii.^® The Com panies refined
these candidate plans based on m ore detailed production cost
m odeling analysis, by further considering DER, including DR
resources,20 and by analyzing system security requirem ents.21
Based on these analyses and several "planning and analysis
considerations," the Com panies developed the near-term action
plans.22 Chapter 7 of the Report presents the Com panies' near-term
action plans, which identify "a set of actions that m ust be taken
to continue on the path of reaching our 100% renewable energy
goal."23 The near-term action plans include "com pany-wide action
3-9These plans are identified in Chapter 4 of the Report.
The Com panies identified and developed two additional long-range
plans for each of the Islands of Lanai and M olokai w ithout using
optim ization m odeling.
20See Report at 3-6 to 3-17. In addition to the plans developed
by the optim ization m odeling, the Com panies analyzed a previously
developed "Post-April PSIP Plan" for the Islands of O ahu, M aui,
and Hawaii.
2^See Report 3-17 3-18 and Appendix
System Security Analysis.
22See Report, Chapter 6.
23Report at 7-1.
2014-0183

plans" and an action plan for each of the five island utility
system s, for the years 2017-2021.
The near-term action plans contain elem ents
including acquisition of new renewable generation resources,
grid m odernization, developm ent of DER policies, achievem ent of
environm ental com pliance, and system level im provem ent projects.^®
IV.
STATEM ENTS O F PO SITIO N
O n February 13, 2017, the Parties filed their SO Ps on the
Report. The com m ission appreciates the Parties' in-depth review of
the Report, detailed com m ents on the plans, and suggestions for
future planning efforts.
The com m ission notes severalcom m on them es am ong the SO Ps.
M any Parties state that the revised PSIPs show m ajor im provem ent
from prior efforts, and that the Report should be accepted.
Several Parties provide recom m ended next steps to establish a
m ethodology for procurem ent decisions. Although there is general
agreem ent that the PSIPs are substantively im proved, m any Parties
rem ain concerned about how certain assum ptions were forced into the
m odels, and how this m ay have biased the m odeling results to
2^Report, Chapter 7
25Report, Chapter 7
2014-0183 11

disproportionately favor utility-ow ned assets. N evertheless,
the Parties generally agree that the PSIPs provide enough
inform ation to m ove forw ard w ith project procurem ent.
Below, the com m ission sum m arizes several com m on
them es expressed throughout the Parties' SO Ps, including:
(a) im provem ents over prior PSIP filings; (b) future resource
procurem ent; (c) recom m endations for future planning;
(d) proposed new fossilfuelgeneration; (e) m odeling processes and
assum ptions; (f) DER; and (g) custom er billim pacts.
A.
Im provem ents O ver Prior PSIP Filings
Several Parties acknowledge the significant im provem ents
to the planning process. The Consum er Advocate points out that the
Report utilized several m odeling tools to com pare and validate
various resource plan options, incorporated stakeholder input,
and re-evaluated inputs and assum ptions. The Consum er Advocate
states that the revised PSIPs "show a reasonable integration of
various resource considerations.
DBEDT com m ends the HECO Com panies form aking the planning
process m ore transparent:
26«Division of Consum er Advocacy's February 14, 2017 Statem ent
of Position in Response to O rder No. 34103; and C ertificate of
2014-0183

As com pared to two years ago, DBEDT today has
a m ore transparent vantage point w ith respect
to the HECO Com panies' developm ent of their
resource plans, in particular regarding the
exchange of data and analysis. The ability to
participate in the HECO Com panies' internal
planning m eetings is evidence of this
transparency and has proved valuable to DBEDT
in developing its positions.^^
Blue Planet states that the transparent optim ization
m odeling utilized in the Report is effective and beneficial.
To illustrate the value that this process has provided. Blue Planet
notes that ”[t]he total forecasted revenue requirem ent forecasted
for the Com panies com bined in the E3 Plan is $2.4 billion less than
the non-optim ized Post-April 2016 Plan."^®
Although Ulupono states that itcannot draw the conclusion
that the entire near-term action plan is the least-cost or best m ix
of resources, Ulupono m aintains that the Report provides enough
inform ation to take "m eaningful near-term actions now, and resolve
Service" ("Consum er Advocate SO P"), filed on February 14, 2017,
at 11.
27«The Departm ent of Business, Econom ic Developm ent,
and Tourism 's Statem ent of Position on the Hawaiian Electric
Com panies' Revised and Supplem ented Power Supply Im provem ent Plans,
and C ertificate of Service" ("DBEDT SO P"), filed on
February 14, 2017, at 6.
2®"Blue Planet Foundation's Statem ent of Position on
the Decem ber 23, 2016 Power Supply Im provem ent Plan Update;
and C ertificate of Service" ("Blue Planet SO P"), filed on
2014-0183

the strategic uncertainties that rem ain in a m atter of m onths,
not years."29
B.
Future Resource Procurem ent
The HECO Com panies, DBEDT, Blue Planet, and Ulupono all
em phasize that there is an urgent need to quickly procure renewable
generation w hile there are stillfederal tax credits available and
to take advantage of current low interest rates. Ulupono m ore
explicitly states that the com m ission "should approve the issuance
of an all-source RFP for utility-scale firm and non-firm renewable
power on allcounties in 2017, 2020, and 2022.
Although DBEDT generally supports procuring renewables,
DBEDT has concerns about the Com panies' proposed procurem ent
approach and m ethodology. DBEDT states:
There is a lack of sufficient evidentiary
support or explanation in the PSIPs to
dem onstrate that the m etrics and criteria the
HECO Com panies w ill apply in com paring
proposals w illresult in procurem ent decisions
that are consistent w ith the PSIPs and State
energy policies.
25«uiupono Initiative LLC's Statem ent of Position; Exhibit A;
and C ertificate of Service" ("Ulupono SO P"), filed on
3°Ulupono SOP at 14.
31DBEDT SOP at 7.
2014-0183

DBEDT further questions the HECO Com panies' m ethodology for
establishing separate blocks forthe evaluation of firm and variable
generation, and how the Com panies w illcom pare and adjust the blocks
of energy between the two. Finally, DBEDT doubts the Com panies'
m ethodology foranalyzing each resource separately to determ ine cost
savings, and the Com panies' proposal to use criteria based on a net
present value m ethodology to determ ine benefits.
Taw hiri recom m ends that all new renewable resources
"m ust be procured in a m anner that is totally agnostic w ith respect
to both technology and the resources involved.Paniolo em phasizes
that allnew generating resources should be com petitively bid and
not assum ed to be owned by the utility. Paniolo suggests that the
HECO Com panies issue an energy storage request forproposals ("RFP")
that is technology neutral for the Big Island, so that both BESS
and pum ped storage hydroelectric power ("PSH") are considered.
C.
Recom m endations for Future Planning
M any ofthe Parties provide sim ilarsuggestions forfuture
planning processes. The Consum er Advocate m aintains that the PSIPs
32«Tawhiri Power LLC's State of Position on the Revised and
Supplem ented Power Supply Im provem ent Plans of Hawaiian Electic
[sic] Com pany, Inc., Hawaii Electric Light Com pany, Inc.,
and M aui Electric Com pany Lim ited; and C ertificate of Service,"
("Taw hiri SO P"), filed on February 14, 2017, at 5.
2014-0183

should be a '‘'working plan to be periodically updated and
revisited[/] and that "HECO and stakeholders need to continuously
seek im provem ents to the planning process."^4
The HECO Com panies propose that the next cycle of
updating the PSIPs should begin in 2019, pursuant to which updated
plans would be subm itted in 2020. The Com panies state that
"[s]uch tim ing would allow the Com panies to focus on executing the
Near-Term Action Plan, and draw upon the Com panies' experiences and
findings from RFPs and developm ents in DER and DR, which could be
used as inputs for the next PSIP effort."^^
DBEDT recom m ends that future planning processes should be
refined "to ensure resulting plans are resilient to uncertainty."^®
DBEDT further recom m ends m ore transparent analysis on siting,
sizing, and selection of proposed resources, w ith respect to
security during em ergencies.^"^
Ulupono proposes the follow ing steps forthe nextplanning
process: (1) define the strategic issues; (2) agree on transparent
^^Consum er Advocate SOP at 18 (em phasis in original).
^^Consum er Advocate SOP at 13.
35«Hawaiian Electric Com panies' Statem ent of Position;
and C ertificate of Service" ("Com panies' SO P"), filed on
3®DBEDT SOP at 19.
^ ^DBEDT SOP at 21.
2014-0183

m ethodology; (3) agree on m odel inputs w ith all stakeholders,
the Consum er Advocate, and com m ission staff; (4) create an interim
report w ith stakeholder input and inquiry; (5) have the
HECO Com panies subsequently conduct the detailed engineering and
planning; and (6) ensure the action plan is based on the planning
process, not the Com panies' business decisions.^®
Blue Planet m aintains that future planning analyses
should continue to use objective optim ization via capacity expansion
m odeling.®® Blue Planet recom m ends that the com m ission im m ediately
com m ence the next planning cycle, issue guidelines on the roles of
the Com panies, consultants, and stakeholders in thatplanning cycle,
and set appropriate m ilestones and tim elines
D.
Proposed New Fossil Fuel G eneration
M any Parties stated concerns w ith the Com panies' proposed
new fossil fuel generation resources -- the 100 M W Joint Base
Pearl Harbor-Hickam ("JBPHH") plant and the 54 M W Kaneohe M arine
Corps Base Hawaii ("KM CBH") plant. Specifically, Parties opposed
how the Com panies m anually selected the JBPHH and KM CBH plants,
®®See Ulupono SOP at 30.
®®See Blue Planet SOP at 3-4
40Blue Planet SOP at 20.
2014-0183 17

and forced them into the optim ization m odels. The Consum er Advocate
believes that additional data and analyses are necessary to assess
ifthe JBPHH and KM BCH projects are in the public interest. DBEDT is
concerned that the m anual selection of these plants "w ill box
out/influence the renewable options chosen in the future"
and "whether the HECO Com panies w illbe responsible for the costs
ifthe m anually selected resources are retired.'"*^
The Joint Parties state that Com panies also treated the
JBPHH plant, the KM CBH plant, and the 18 M W com bustion engine power
plant proposed to be installed in South M aui in 2022, "as 'fixed
assum ptions,' 'm ust build' resources . . . effectively circum venting
and nullifying the planning process.U lupono argues that the
Com panies' analysis dem onstrates that the proposed JBPHH and KM CBH
plants are not the least cost choices and should not be justified
as w aiver projects.^^ Ulupono also indicates that "[w ]hen RESO LVE
was allowed to optim ize the construction plan for these projects,
41DBEDT SOP at 22.
^2«sierra C lub's D istributed Energy Resources C ouncil of
H aw aii's Hawaii Solar Energy Association's, and SunPower
C orporation's Statem ent of Position RE Hawaiian Electric Com panies'
PSIP Update Report, filed on Decem ber 23, 2016; and C ertificate of
Service" {"Joint Parties SO P"), filed on February 14, 2017, at 14
(Sierra Club, DERC, HSEA, and SunPower are collectively referred to
as the "Joint Parties" in this O rder).
^^ulupono SOP at 3.
2014-0183

total resource costs were lowered by postponing these investm ents
until2045.
E.
M odeling Process and Assum ptions
Several Parties provided detailed feedback about other
constraints and assum ptions that the Com panies applied to their
analyses, particularly w ith respect to the HELCO system .
Taw hiri expressed concern that there is a "lack of consistency and
possible bias in the evaluation of wind energy investm ent in
Hawaii County."4s W ith respect to the wind generation on the HELCO
system , Paniolo states "[t]he fact that the entire 70 M W was not
procured in 2020 appears to be the result of an artificial
20 M W transm ission constraint on wind generation for the year 2020
that was forced into the E3 RESO LVE m odeling by the
HECO Com panies."46 Paniolo states that the "Near-Term Action Plans
should reflect the m ore optim al, earlier procurem ent of 70 M W of
wind in 2020, even if project is installed in phases."4"^
44uiupono SOP at 16.
45Tawhiri SOP at 2.
46"Paniolo Power Com pany, LLC's Statem ent of Position;
and C ertificate of Service" ("Paniolo SO P"), filed on
February 14, 2017, at 13 (internal citations om itted).
4'^Paniolo SOP at 14.
2014-0183

Taw hiri calls attention to HELCO 's use of a single wind generation
profile in allsim ulations of wind energy investm ents, and suggests
that the "proper approach is to use m ultiple wind generation
profiles w ith each profile representing a specific geographic
location am ong the alternative wind energy resources (farm s) under
evaluation for each plan."^®
Paniolo states thatthe Reportdoes not disclose tradeoffs
between alternative resource options, particularly regarding
storage,Paniolo questions why BESS was selected over PSH w ithout
identifying the tradeoffs between the two resources.
Paniolo states that itis unclear why the HECO Com panies opted to
assum e a low-end useful life figure for PSH, w hile opting to use a
high-end useful life assum ption for BESS, and m aintains that the
figures used for the useful life assum ptions should be equal.
48Tawhiri SOP at 5.
^^See Paniolo SOP at 7.
^°See Paniolo SOP at 7.
^^See Paniolo SOP at 8.
2014-0183

F.
DER
Blue Planet suggests that the role of DER is a m ain issue
that rem ains "unresolved" in the R eport.Blue Planet recom m ends
that future planning efforts should develop m ethods to evaluate and
incorporate energy efficiency in relation to other resource
options.53 The Joint Parties state that the m odeling analyses
did not pair distributed solar w ith distributed energy storage,
but rather m odeled storage as an independent resource.54
The Joint Parties further state that "this m ay have resulted in the
selection of separate utility-scale battery resources, but ignored
the benefits of 'sm art'DER system s com bining solarand batteries55
Ulupono com m ends "the HECO Com panies for the extensive
circuitby circuitgrid-side planning in PSIP Section N, as w ell as
for the transparency of the m ethodology and analysis."5®
Ulupono affirm s that the HECO Com panies have perform ed extensive
system security analysis, but notes that "long and m id-term system
security requirem ents would change if 'sm art export'"
54joint Parties SOP at 10.
55joint Parties SOP at 9.
56ulupono SOP at 19.
2014-0183

was evaluated.U lupono expresses concern that the Report does not
analyze how the potential for sm art export could lower ancillary
service dem ands and the need for "extensive utility sided batteries
and grid upgrades.
G .
Custom er BillIm pacts
Several Parties are concerned about the projected
long-term increase in electric rates. COH is especially concerned
about the im pact increases w illhave on ratepayers on the Island of
Hawaii and recom m ends that future planning efforts include an
"over-arching cost-controlprocess . . . Paniolo is concerned
w ith the "detrim ental im pacts of prolonged high electricity rates
outlined in the PSIPs . . . The HECO Com panies discuss how the
rate projections resulting from the PLEXOS outputs "should not be
used as precise long-term projections of custom er rates.
The Com panies explain that the value of these projections "is not
s’^Ulupono SOP at 27.
seulupono SOP at 27.
^^"County of Hawai'i's Statement of Position; and Certificate
of Service" ("COH SOP"), filed on February 14, 2017, at 15.
®°See Paniolo SOP at 3,
®^Companies' SOP at 14.
2014-0183

in the precise values but in the relative results of planning to
provide context to inform im portant pending and future resource
acquisition and system operation decisions.
V.
DISCUSSIO N
A.
O verview
As the com m ission observed at the outset of this
proceeding, each electric utility's power supply system is becom ing
m ore com plex and operationally challenging as greater quantities of
diverse renewable energy resources are integrated w ith older,
relatively inflexible base load fossil-fuelgeneration resources.
In the m ore than two and a half years since this proceeding began,
com plexities in the islands' electric system s have only increased,
in large part because of continuing developm ents in DER, such as
rooftop PV.
G iven the length of tim e that has passed since the
com m ission and Parties first began this docket, it is useful to
®2Com panies' SOP at 14.
®^O rder No. 32257 at 1 (citations om itted)
2014-0183

revisit the intended purpose and expectations of the Com panies'
PSIPs. As the com m ission has previously stated:
[t]he ultim ate purpose of this proceeding is to
determ ine a reasonable power supply plan for
each of the HECO Com panies that can serve as a
strategic basis and provide context to inform
im portant pending and future resource
acquisition and system operation decisions.® ^
The com m ission has repeatedly stressed that the developm ent of
w ell-vetted, credible, com prehensive system analysis®® is
"essential to the HECO Com panies fulfilling their role to provide
a platform to m eet the diverse service requirem ents of their
custom ers by integrating a variety of generation sources and
custom er-sited resources in an econom ically and operationally
efficient manner."®®
The com m ission acknowledges the challenges inherent in
long-term forecasting and analysis, particularly where, as here,
the underlying inputs and assum ptions are dynam ic and subject to
significantuncertainty over the next decade or m ore. Accordingly,
the com m ission has stated its expectation that the PSIPs
"should place particular em phasis on identifying and supporting
the near-term actions, applications, and decisions necessary
®4Q rder No. 33320 at 2.
®®See O rder No. 33320 at 40-41.
®®0rder No. 33320 at 137.
2014-0183

to effectively m eet identified challenges, policy goals,
and planning objectives."® "^
Although the instant proceeding has proven to be an
extensive undertaking, the com m ission can now affirm that the
objectives outlined above have largely been m et, subject to the
concerns articulated herein. The PSIPs in the Report reflect
significant im provem ents over the previous PSIPs filed in this
docket. The Com panies have expanded the scope of their analysis,
and engaged new planning tools to better address the substantial
planning challenges they face. The Com panies have m ade their
filings m ore transparent, incorporated additional stakeholder
input, and addressed m any of the com m ission's previously stated
concerns. The result is a set ofplans thatprovides usefulcontext
form aking inform ed decisions regarding the near-term path forw ard.
The com m ission appreciates the significant effort
expended in this proceeding by the HECO Com panies,
the Consum er Advocate, and allParties, whose continued engagem ent
and respectful dialogue have helped develop an extensive record in
this docket. Afterreview , com m ission has reasonable assurance that
m any of the actions identified in the near-term action plans are
credible, supported by sound judgm ent and analysis, inform ed by
stakeholder input, and consistentw ith State energy policy and prior
®"^O rder No. 33877 at 15.
2014-0183

com m ission orders. Thus, the com m ission believes that the
Com panies' analyses are sufficient to provide context and inform
near-term procurem ent and resource acquisition.® ® As a result,
the com m ission expects that the Com panies w ill continue
im plem enting the valid aspects of the PSIPs.
N otwithstanding the urgent need to prudently im plem ent
the near-term action plans, the com m ission has concerns w ith several
aspects of the PSIPs. The com m ission has identified areas that
require additional im provem ents, analyses, or justification to
address rem aining questions or concerns. These are not
"fatal flaw s," but rather are areas the com m ission expects all
Parties w ill continue to address either in parallel proceedings
(e.g.. Docket No. 2014-0192), through the Com panies' subm ission of
discrete project applications, or as part of the next planning
cycle. The PSIPs that resulted from this proceeding should not be
viewed as a prescriptive plan for future, but a useful snapshot of
the Com panies' dynam ic and ongoing planning efforts.
In sum , by this D ecision and O rder, subject to the
conditions set forth in herein, the com m ission accepts the Report,
and directs the Com panies to continue im plem enting the
near-term action plans, particularly those elem ents described in
Section V.B., below.
®®See O rder No. 33320 at 2.
2014-0183

The follow ing sections ofthis O rder discuss high priority
near-term actions in the Com panies' resource plans, describe the
com m ission's concerns w ith certain aspects of the plans,
identify topics for further analysis, and offer guidance regarding
the Com panies' future efforts to continuously refine and im prove
their planning approach.
B.
High Priority Near-Term Actions
The com m ission is encouraged by the Com panies'
com m itm ents to com petitively procure new grid-scale renewable
resources, to continue to work w ith stakeholders to develop CBRE
and DER program s, and to im plem ent system -level reliability
im provem ents for each island grid. These high-priority near-term
actions are discussed in detail, below.
1.
C om petitive Procurem ent of G rid-Scale Renewable Resources
The Com panies' resource plans include procurem ent of
nearly 400 M W of new renewable resources across all service
territories by 2021.®® C ollectively, this represents the largest
new generation procurem ent ever undertaken in the State. There is
®®See Report, Chapter 7.
2014-0183

broad stakeholder support for acquiring new renewable resources,
as w ellas significantdeveloper interestin m eeting H aw aii's needs.
Furtherm ore, the Com panies m ust m ove quickly to enable custom ers to
benefit from available tax credits, such as the federal investm ent
tax credit ("ITC "), which is set to expire w ithin the near-term
action plan period. As such, the com m ission expects the Com panies
to devote attention and resources to ensure a transparent, tim ely,
and successful procurem ent process.
The com m ission intends to open a series of new dockets to
serve as repositories for filings related to the planned upcom ing
procurem ents. As part of the developm ent of the procurem ent
process, the Com panies should carefully consider the design of each
RFP, including the quantity of energy and grid services requested,
eligible technologies, the interconnection study process,
the com plexity and risks associated w ith m odel power purchase
agreem ents ("PPAs"), the tim eline to com plete the procurem ent
process, the availability of incentives (e.g., the federal ITC),
and the sequencing of future procurem ents at known intervals to
provide greater transparency to m arketparticipants and reduce costs
to custom ers. The Com panies m ust learn from and im prove upon prior
^°As the com m ission recently stated, it expects that the
Com panies w ill fully consider energy storage system s in
proposing any new generation projects. In re Hawaiian Elec. Co.,
Docket No. 2016-0342, D ecision and O rder No. 34676,
("O rder No. 34676") filed on June 30, 2017, at 79. The com m ission
2014-0183

procurem ent attem pts, including the recent energy storage and w aiver
project solicitations.
There are benefits and drawbacks to every procurem ent
approach; thus, the com m ission expects the Com panies to solicitand
incorporate feedback from stakeholders where appropriate, as w ell
as the Independent O bserver, during the drafting of future requests
for proposals and m odel PPAs. In sum , the com m ission encourages
the Com panies to use upcom ing procurem ents as opportunities to
continue to collaborate w ith stakeholders to ensure a high-quality
approach that fairly considers alternatives and prom otes the tim ely
and successful deploym ent of cost-effective renewable resources for
custom ers" benefit.
2 .
Actions R elated to CERE and PER Integration
The com m ission views the ongoing developm ent of CBRE and
DER program s as high priorities for near-term action by the
HECO Com panies. These efforts are currently the subject of
views energy storage, such as battery storage or PSH, as an
essential elem ent in achieving the State's goals to integrate
increasing levels of renewable energy generation into the State's
island grids and "a viable option for supporting the integration of
low cost renewables into the grid, w ith the capacity to provide
fully dispatchable renewable energy." O rder No. 34676 at 79-80.
"^^See Public U til. Com m 'n, Docket No.03-0372,
D ecision and O rder No. 23121, Exhibit A, Section III.C , at 13-16.
2014-0183

Docket Nos. 2015-0389, 2014-0192, and 2015-0412, am ong others.
The com m ission supports m any of the actions identified by
the Com panies, including procurem ent of diverse CERE projects;
further developm ent of DER program s (e.g., "sm art export" tariffs),
activation of advanced inverter functions for DER,
further im provem ents to the interconnection process (e.g.,
offering an online application portal), developm ent of a
DR portfolio that provides valuable grid services from custom ers,
and continued investm ent by the Com panies in research, developm ent,
and dem onstration projects. The com m ission rem ains very supportive
of the use of energy efficiency and cost effective DR resources to
resolve operating needs, m eet system reserve requirem ents,
defer the need for future capacity additions, provide ancillary
services and assist w ith the integration of additional renewable
energy resources, and prom ote the reliable and econom ical operation
of the electricalgrid.'^^
These proposed actions are consistent w ith the State's
energy policy and prior com m ission orders. Thus, the Com panies
should accelerate their efforts to m ake m eaningful near-term
progress on these topics in relevant parallelproceedings.
*^^See In re Public U til. Com m 'n, Docket No. 2007-0341,
O rder No. 32054 "Policy Statem ent and O rder Regarding Dem and
Response Program s," filed on April 28, 2014, at 1-2.
2014-0183

3 .
System -Level G rid R eliability Projects
In the R eport, the Com panies propose to m ake several
system -level grid reliability im provem ents, including upgrades to
the under-frequency load shedding ("UFLS") schem e and projects to
reduce faultclearing tim e. The HECO Com panies have discussed these
im provem ents for m any years, and appear to have only partially
im plem ented them .'^^ Increasing the dynam ic flexibility of the UFLS
schem e for each island and im proving fault detection and clearing
tim es are w orthw hile objectives that the Com panies should pursue,
especially given the high proportion of non-synchronous generation
expected on m ost islands in the near future.The Com panies should
evaluate such options to enhance grid reliability, in conjunction
w ith procurem ents for new renewable resources, developm ent of DR
and other DER program s, and the im plem entation of the Com panies'
grid m odernization strategy.
^3See Report at 7-29 to 7-30.
'^W hile the com m ission encourages the Com panies to pursue these
projects, the com m ission is not providing regulatory "pre-approval"
of any investm ents at this tim e. Such decisions w illbe m ade in
the context of future applications for cost-recovery (e.g.,
general rate case), as appropriate.
2014-0183 31

c.
Com m ission Concerns w ith the Report
W hile there are m any w ell-supported proposals in the
Report, the com m ission has concerns w ith som e aspects of the Report,
including the anticipated increases in custom er rates,
proposed conventional generation projects,"^® proposed BESS and
synchronous condenser projects;”^® and certain proposed
transm ission projects.
As stated generally above, the com m ission expects the
Com panies to rigorously exam ine the prudence, tim ing,
cost effectiveness, affordability, and reasonably available
alternatives in individualapplications for future projects. Thus,
m any of the resources identified in the Report w illbe subject to
further scrutiny in future proceedings. To the extent that the
Com panies choose to propose these resources and projects in the
future, the Com panies m ust address these concerns prior to or as
part of the review of any necessary applications or approvals by
the com m ission. At this tim e, the com m ission provides the follow ing
discussion of concerns to provide broad guidance w ith respect to
several specific resources and projects included w ith the Report.
"^^See Report at 7-18 and 7-24.
~^®See Report at 7-9.
'^'^See Report at 7-22 to 7-23 {M ECO ) , 7-29 to 7-30 (HELCO )
2014-0183

1.
Custom er Rate and BillIm pacts
The com m ission continues to be concerned w ith the
affordability of the Com panies' plans. M ost recently,
the com m ission directed the Com panies to address affordability and
the risks associated w ith custom er exit in O rder No. 33877.^®
The rates associated w ith the Com panies' near-term action
plans are projected to increase substantially (between 18% and 25% )
during the near-term action plan period, and even m ore in the
subsequent five years on O ahu and the Island of H aw aii.’^®
^®O rder No. 33877 at 28-30 (citations om itted).
^®Figure 1 and Table 1 are based on "PSIP Rates and BillIm pact
w ith CAGR - C onsolidated Final.xlsx," filed in support of the
R eport, Chapter 5 .
2014-0183

Figure 1
Average R esidential R ates (R eal $/kW h)
$0.45
$0.43 (+43%)
$0.36 (+44%)
$0.34 {+ 23%)
$0.20
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
♦ Oahu » Hawaii Island a Maui
Table 1
Average R esidential Rates (R eal $/kW h)
% Increase for the
near-term action plans
(2017-2021)
% Increase for
2017-2026
HECO 17.8% 44.1%
HELCO 25.1% 42.9%
M ECO 18.2% 23.0%
G iven the substantial increase in rates forecasted in the
Report, the com m ission is concerned that the Com panies have not
fully considered the affordability of their plans. The Com panies
have provided only lim ited responses to the com m ission's instruction
2014-0183

to analyze custom er and im plem entation risks. The Com panies
do not appear to have evaluated the capital investm ents,
financial com m itm ents, and the resulting increasing rates, in the
context of affordability to custom ers and the risk of
stranded assets.
Itis the Com panies' responsibility to diligently exam ine
and fully consider the possibilities and risks thattheirplans pose
to custom ers. The im pacts of increasing custom er rates and the
prospect of uneconom ic custom er exit can be reasonably anticipated
and could be forestalled or exacerbated by the Com panies'
investm ent, procurem ent, and operationaldecisions. Thus, the risks
associated w ith such decisions rest w ith the Com panies.
2.
New Conventional G eneration Resources
The O ahu Action Plan includes a proposal for HECO to
install and operate a reciprocating engine at M arine Corps
Base Hawaii ("M CBH"), that the Com panies envision acquiring via a
w aiver from the com petitive bidding fram ework and a G .O . 7
^^See, e.g., HECO 's Response to PUC-IR-97. Although the
Com panies state that Appendix Q contains "prelim inary analysis
of . . . the com parative econom ics ofa custom er rem aining connected
to the utility grid versus disconnecting from the grid,"
the com m ission notes that the inform ation and analysis presented in
Appendix Q is m inim al and incom plete.
2014-0183

application.® ^ The Com panies also seek to install an additional
”100 M W of firm , dispatchable, flexible generation," likely through
an RFP, but possibly through a w aiver process.® ^
Sim ilarly, the M aui near-term action plan proposes new
generation to be installed in 2022.®® The M aui near-term action
plan does not specify the type and size of the new generation
resources to be added, presum ably because the proposed installation
date falls outside of the near-term action plan period of
2017 - 2021. However, in the longer-term supporting optim ization
and econom ic analyses for M ECO , the Com panies specify the addition
of two 9 M W internalcom bustion generation units for the year 2022,
w ith an additional 20 to 40 M W of biom ass generation.®^
The com m ission's prim ary concern w ith these proposed
projects is the apparent lack of thorough analysis in the Report to
justify the resources. W ithout this analysis, itappears that the
Com panies sim ply presum ed that these generation resources would be
included in each resource plan.®^ As discussed extensively in prior
com m ission orders, such an approach is not sufficient.
®®Report at 7-18.
®2Report at 7-18.
®®Report at 7-24.
®^See Report at 4-12.
®^See Ulupono SOP at 16 {citations om itted).
2014-0183

The Com panies should not assum e the com m ission w illwaive
the com petitive bidding process for any of these proposed projects.
If the Com panies choose to pursue these resources, the Com panies
should incorporate the need for the com petitive bidding process in
planning the tim ing of its procurem ents. Prior to initiating any
such procurem ent, the Com panies m ust evaluate and dem onstrate
the m erits of the selection, sizing and tim ing of these
resources, including evaluation of available alternatives
(including generation, storage, and distributed resources such as
energy efficiency and DR).
3 .
BESS and Synchronous Condensers
The long-range resource plans and near-term action plans
for each of the five island utility system s include new BESS and
synchronous condenser resources.®"^ The proposed BESS resources are
designed to provide several utility system functions,
including m eeting "fast frequency response contingency,"® ®
®®See HECO 's Response to PUC-HECO -IR-88
®~^See Report at 7-9.
®®See Report at 7-8.
2014-0183 37

"load-shift,"® ^ and "regulating/ram ping" requirem ents.
The Com panies also state that they "w ill continue to evaluate and
pursue distributed energy storage system s (DESS) to benefit
DER integration."® ^
In the Report, the Com panies analyzed the system security
that each island grid needs to support diligent efforts to im prove
grid reliability. However, itis not clear ifthe Com panies have
considered a full range of alternative options, including PSH,
therm al, and electrical storage technologies, or fully explored
dem and-side, as w ell as utility storage options. PSH resources,
in particular, m ay help provide cost-effective long-duration
storage, com plem enting distributed resources like DR.
The Com panies should continue their efforts to im prove
reliability and ensure system security, taking into account the
m agnitude and duration of ancillary services needs, as w ell as
expected changes in ancillary services needs over tim e. Further,
the Com panies should propose appropriately sized resources to m eet
those needs. Proposed resources should be co-optim ized to provide
m ultiple ancillary services ifpossible, and the Com panies should
®®See Report, Chapter 4, alltables.
®°See Report at 7-17 to 7-18.
®^Report at 7-14. See also Report
and Appendix 0.
®2Report, Appendix O .
2014-0183 38
3-17 3-20,

evaluate options to low er costs to custom ers, such as pairing w ith
renewable energy projects to enable storage resources to benefit
from available tax credits. As stated above, the com m ission expects
the Com panies to consider the full range of available options,
including DR resources, as w ell as various technologies and
com binations of technologies.
Sim ilarly, the Com panies" analysis of synchronous
condenser resources does not appear to be com plete. If the
Com panies decide to pursue these resources, the Com panies m ust
support theirproposals w ith thorough and sound supporting analyses,
prior to, and/or in the context of, procurem ent proceedings and
review for necessary approvals by the com m ission.
4 .
Transm ission System Projects
The M aui and Hawaii Island near-term action plans
both identify several transm ission system upgrade projects.^^
Regarding the M aui Island transm ission upgrades, the Com panies state
that "[n]on-transm ission alternatives were considered as options to
the transm ission upgrades," including DG , BESS, DR, and synchronous
93Report at 7-22 to 7-23, 7-29
2014-0183

condensers. In addition, the Com panies state that M ECO w ill
further explore the potential of aggregated DR resources as a
"non-transm ission" alternative. However, the Report does not
sufficiently evaluate the possibility of non-transm ission
alternatives to the transm ission upgrades identified in the M aui or
Hawaii Island near-term action plans.
The com m ission supports the ongoing consideration of
non-transm ission alternatives forthe M aui and HawaiiIsland system s
as m entioned in the Report, along w ith procedures to solicit
com petitive proposals that consider a fullspectrum of transm ission
and non-transm ission options. IfM ECO or HELCO decides to pursue
such resources, the com m ission expects any application for
transm ission system upgrades to ensure that non-transm ission
alternatives and com petitively solicited alternatives are
appropriately considered.
s^Report at 7-22
95Report at 7-23
2014-0183

D.
Topics R equiring Further Analysis
1.
Achieving RPS G oals
As requested by the com m ission, the Reportplaces greatest
em phasis "on the near-term actions that allow [the Com panies] to
m ake strong progress on achieving our clean energy goals.
Although the prim ary purpose of the Report is to provide context
for near-term decisions, the Com panies also assert that their
resource analyses support a reasonable course to ultim ately attain
the State's 2045 RPS requirem ent of 100% by the year 2040, and a
goal of 100% renewable generation (i.e., no fossil fuel powered
generation, exceeding the 100% RPS) by the year 2045.®’^
Beyond serving as aspirational goals, the long term RPS
and renewable generation targets are im portant planning and design
criteria. The com m ission com m ends the Com panies' com m itm ent to
achieving the RPS ahead of schedule. N evertheless, the com m ission
has som e concerns regarding the technical feasibility and econom ics
of the long-term resource plan for each island. It appears that
certain technology options, such as PSH resources, m ay have been
excluded from the analysis. It also appears that certain costs
^^Report at ES-2
^'^Report at 1-1.
2014-0183

m ay notbe fully incorporated into the rate and billim pact analysis
and several of the underlying analyses in the Report suggest that
negative reliability im pacts could result from im plem enting the
long-term resource plan.®® The com m ission expects future planning
cycles w illm ore fully address the capital costs, operating costs,
and reliability concerns associated w ith long-term achievem ent of
the RPS goals.
2.
s.
M olokai and Lanai Advanced 100% Renewable Energy Plans
M ECO intends to solicitproposals for the procurem ent of
biofuels in 2018,®® follow ed by an application w ith the com m ission
for approval of a biofuel contract in 2020.^°° The Lanai near-term
action plan indicates that M ECO w ill pursue a process to procure
cost-effective renewable resources to achieve 100% renewable energy
in 2030 or possibly sooner.
As noted above, the com m ission supports M ECO 's efforts to
achieve 100% renewable energy for the islands of M olokai and Lanai
ahead of the tim eline established in the RPS. M ECO should
®®See e.g., Report, Appendix P at P-16 to P-18
®®Report at 7-25.
looResponse to PUC-IR-88.
lo^Report at 7-27.
2014-0183

coordinate future procurem ent efforts w ith its upcom ing RFP for new
grid scale resources. This should include an opportunity for
com petitive bidding for resources that can provide com parable
services as biofuel powered, utility-ow ned generation.
Such resources could include com binations of energy efficiency,
renewable generation, DR, and various storage options, in addition
to or instead of larger-scale therm al generation. The Com panies
should also pursue transparent, com petitive and com m unity-engaged
efforts^°2 for the Islands of M olokai and Lanai, for procuring
resources and further considering the costs and benefits of early
attainm ent of 100% renewable generation, consistent w ith the needs
and goals of these com m unities.
3 .
System Security Requirem ents
In O rder No. 33877, the com m ission noted that the
Com panies had not adequately supported their system security
analysis, reiterating guidance from O rder No. 33320.^°^
Specifically, the com m ission, stated:
In O rder No. 33320, the com m ission identified
significant concerns in the follow ing areas
related to system security analysis:
^o^See Report at 7-27.
io3see Order No. 33877 at 25-26 (citations omitted)
2014-0183

1. The HECO Com panies have not clearly
established the technical basis for the
proposed requirem ents and defined them in
technology-neutral term s/
2. The HECO Com panies have not adequately
dem onstrated how the proposed requirem ents
balance cost w ith system reliability and
risk; and
3. System security requirem ents appear to
unreasonably lim it utilization of and
increase costs to integrate renewables.
After review ing the Report, the com m ission notes
significant im provem ent in several aspects of the system security
analysis. Som e of these im provem ents enabled the Com panies to
identify ways to reduce costs and develop innovative solutions to
m eet custom er needs. por exam ple, the Com panies have developed
an analytical approach to unbundle various ancillary services from
conventional generation resources. This analysis has allowed the
Com panies to define specific ancillary services needs as part of
the DR portfolio in Docket No. 2015-0412. In addition,
the Com panies' system security analysis now appears to m ore
realistically consider the characteristics and capabilities of DER.
N evertheless, w ithin the lim ited tim e provided for the
final Report, the Com panies have not fully perform ed the system
lo^order No. 33877 at 25-26, citing O rder No. 33320, at 112
{citations and quotations om itted).
lossee, e.g.. Docket Nos. 2014-0192 and 2015-0412.
2014-0183

security analysis required by the com m ission in O rder No. 33320,
and again in O rder No. 33877. The com m ission expects that the
Com panies w ill continue building upon their efforts to date by
diligently refining their system security analysis.
E.
Expectations for Im plem entation
By this D ecision and O rder, the com m ission accepts the
Report, and intends to use the PSIPs "in conjunction w ith the
evaluation of specific filings for approval of capital and other
projects.Although the com m ission supports m any aspects of the
Report, given the uncertainty about future conditions, and because
planning is a continuous and ongoing activity, the com m ission
encourages flexibility and anticipates variation and m odification
of the plans, as tim e goes on. Future applications "w ill be
evaluated on [their] own m erits pursuant to applicable statutory
and regulatory standards, as w ell as [their] relationship to the
final PSIPs.
As such, in subsequent applications for approval or
cost-recovery, the utility w illbear the burden of supporting the
m erits of each proposed resource or action. The com m ission's
i°®O rder No. 33877 at 2.
lO’^O rder No. 33877 at 2.
2014-0183

acceptance of the Report should not be construed as regulatory
pre-approval for any specific elem ent identified in the Report.
The inclusion of a specific resource or action in the Report or
near-term action plans does not m ean the com m ission w ill presum e
that resource or action is necessary, properly tim ed, or prudent.
Furtherm ore, the com m ission expects the Com panies to consider and
propose the m ost efficient and cost-effective resource
alternatives, including resources not specifically included in the
Report or near-term action plans, as applicable. The com m ission
expects the Com panies to procure resources that, both individually
and collectively, continue to drive down custom er costs com pared to
the costs estim ated in the Report.
In addition, the revenue adjustm ent m echanism cap
("RAM Cap")/ that was im plem ented pending "approval" of the
Com panies' PSIPs, rem ains in effect, unless otherwise ordered by
the com m ission. Any proposed changes to the RAM Cap w ill be
addressed in pending or future rate cases for each of the
HECO Com panies.
In subsequent applications, the Com panies m ust fully
support the m erits of each resource or proposed action.
The com m ission expects the procurem ent activities identified in the
^Q^See In re Public U til. Com m 'n, Docket No. 2013-0141,
O rder No. 34514 ("O rder No. 34514"), filed on April 27, 2017.
2014-0183

PSIPs and near-term action plans to result in the acquisition and
developm ent of the m ost cost-effective resources for custom ers,
and to include consideration of resources not necessarily-
identified in the PSIPs or near-term action plans. The com m ission
expects the Com panies to strive to procure resources at the low est
costs possible, and at costs lower than estim ated in the near-term
action plans.
In addition, although the com m ission supports the
Com panies' am bitious plan to achieve the State's RPS ahead of
schedule, it is m ost im portant for the Com panies to focus their
efforts on designing and executing sound procurem ent and application
processes that address the com m ission's concerns, as described in
this and prior O rders.
Therefore, the com m ission directs the Com panies to take
the follow ing actions, at a m inim um , as a part of efforts to
im plem ent the near-term action plans: (1) include a fair and
transparent evaluation of alternatives, including consideration of
alternatives that could result in low er cost and/or low er risk
for custom ers, (2) consider all appropriate technologies,
including com binations of technologies, to address system ,
capacity, and energy needs, rather than specifying a single resource
option, (3) sufficiently justify how each resource is the best
choice in conjunction w ith the near-term action plans identified in
2014-0183

the Report, and (4) include perform ance m easures to evaluate
im plem entation of the proposed action.
F.
Future Planning Activities
The conclusion of this docket does not m ean the end of
the Com panies' planning efforts. The Com panies have repeatedly-
stated that planning is a continuous process, and the com m ission
agrees
109 As such, the Com panies m ust work diligently to
continuously im prove their planning tools and m ethods, and tim ely
revise their estim ates and forecasts as part of an ongoing,
cyclicalplanning process. The com m ission also agrees that even
as the Com panies' continually update their work, now is the tim e to
focus on im plem enting the Com panies' near-term action plans,
consistent w ith the guidance provided herein.
The Com panies' future planning efforts m ust coordinate
w ith and learn from other ongoing activities and pertinent
proceedings and activities, including program s such as DER, DR,
CBRE, and proposed grid m odernization projects. Future planning
lo^See, e.g., Report at ES-7, 2-15, 2-18, and 7-28.
^^°Consum er Advocate SOP at 18.
^^^See, e.g., Com panies' SOP at 3, DBEDT SOP at
and Blue Planet SOP at 2.
6,
2014-0183

efforts m ust also include and build upon the new set of tools used
in the last round of PSIPs, particularly the use of advanced
resource optim ization m odels.Finally, future planning efforts
m ust continue to actively engage stakeholders, and incorporate their
constructive input.
The com m ission observes that in the Com panies'
June 2017 D raft Report, "M odernizing H aw aii's G rid for
O ur Custom ers," the Com panies propose a planning process that
integrates bulk system resource planning w ith transm ission and
distribution planning to assess total resource net benefits.^^^
The Com panies state that the process would engage custom ers and
stakeholders at key junctures in the integrated planning effort.
The com m ission is supportive of the Com panies' proposal to m ore
effectively integrate resource, transm ission, and distribution
planning going forw ard.
Therefore, the com m ission directs the Com panies to file
w ith the com m ission, outside of this docket, a report that details
the Com panies' planning approach and schedule for the next round of
ii^Blue Planet SOP at 3-4.
ii33ee "HECO Com panies' G rid M odernization Strategy (D raft) for
Stakeholder Review and Com m ent," filed on June 30, 2017, at 22-23
("D raft G rid M odernization Strategy"), available online at
https://w w w .haw aiianelectric.com /D ocum ents/about_us/investing_in_t
he_future/grid_m odernization_strategy_draft.pdf.
2014-0183

integrated planning. The Com panies shallfile this report w ith the
com m ission no later than M arch 1, 2018.
VI.
ORDERS
THE CO M M ISSIO N O RDERS:
1. The Report is accepted, for the purposes stated and
subject to the conditions set forth in this O rder.
2. By M arch 1, 2018, the Com panies shall file w ith the
com m ission, outside of this docket, a report that details their
planning approach and schedule for the next round of
resource planning.
2014-0183

3. The Com panies' M otion for C larification of O rder
No. 33877, filed on August 26, 2016, is dism issed as m oot.
4. This docket is closed unless determ ined otherwise by
the com m ission.
DONE at H onolulu, Hawaii JUL 1 4 2017
APPRO VED AS TO FORM
M ike S. W allerstein
Com m ission Counsel
2014-0183.ljk
2014-0183
PUBLIC UTILITIES CO M M ISSIO N
OF THE STATE OF HAW AII
Randall Y. Iwase Chair
Lorraine H. Akiba, Com m issioner
By
J^jKes P. G riffin, Dm m issioner

CERTIFICATE O F SERVICE
The foregoing order was served on the date of filing by m ail,
postage prepaid, and properly addressed to the follow ing parties:
DEAN NISHINA
EXECUTIVE DIRECTO R
DEPARTM ENT OF COM M ERCE AND CONSUM ER AFFAIRS
DIVISIO N O F CONSUM ER ADVOCACY
P.O . Box 541
Honolulu, HI 96809
JO SEPH P, VIO LA
VICE PRESIDENT, REG ULATO RY AFFAIRS
HAW AIIAN ELECTRIC COM PANY, INC.
P.O . Box 2750
H onolulu, HI 96840-0001
DO UG LAS S. CHIN
ATTO RNEY G ENERAL O F HAW AII
DEBO RAH DAY EM ERSON
GREGG J. KINKLEY
DEPUTY ATTO RNEYS G ENERAL
DEPARTM ENT O F THE ATTO RNEY G ENERAL
STATE O F HAW AII
425 Q ueen Street
H onolulu, HI 96813
Counsel for DEPARTM ENT O F BUSINESS, ECO NO M IC DEVELO PM ENT,
AND TO URISM
HENRY Q CURTIS
VICE PRESIDENT FOR CONSUM ER ISSUES
LIFE O F THE LAND
P.O . Box 37158
H onolulu, HI 96837

C ertificate of Service
Page 2
W ARREN S. BO LLM EIER II
PRESIDENT
HAW AII RENEW ABLE ENERG Y ALLIANCE
46-040 Konane Place 3816
Kaneohe, HI 96744
SANDRA-ANN Y.H. W ONG
LAW O FFICE O F SANDRA-ANN Y.H. W ONG
1050 Bishop Street, #514
Honolulu, HI 96813
Counsel for TAW HIRI POW ER LLC
PATRICK K. W ONG
CO RPORATIO N CO UNSEL
M ICHAEL J. HO PPER
DEPUTY CO RPO RATIO N CO UNSEL
DEPARTM ENT O F THE CO RPORATIO N CO UNSEL
COUNTY O F M AUI
200 S. High Street
W ailuku, M aui, HI 96793
Counsel for the COUNTY O F M AUI
ERIK W . KVAM
PRESIDENT
RENEW ABLE ENERG Y ACTIO N CO ALITIO N O F HAW AII, INC
4188-4 Keanu Street
H onolulu, HI 96816
RICK REED
761 Ahua Street
H onolulu, HI 96819
D irector and Policy Advisor for HAW AII SO LAR
ENERG Y ASSO CIATIO N

Page 3
THOM AS L. TRAVIS
VICE PRESIDENT
PUNA PONO ALLIANCE
930 Tahoe Blvd STE 802/387
Incline Village, NV 89451
TIM LINDL
KEYES, FO X & W IEDM AN LLP
436 14th street, Suite 1305
O akland, CA 94612
RO BERT HARRIS
595 M arket Street, 29^h Floor
San Francisco, CA 94015
BEREN ARG ETSING ER
KEYES, FO X & W IEDM AN LLP
401 H arrison O aks Boulevard, Suite 100
Cary, NC 27513
Counsel for THE ALLIANCE FO R SO LAR CHO ICE
TOM KO BASHIGAW A
DIRECTO R, REG ULATO RY AFFAIRS
HAW AI'I GAS
745 Fort Street, Suite 1800
H onolulu, HI 96813
DEAN T. YAM AM OTO
CARLITO P. CALIBO SO
TYLER P. M cNISH
YAM AM OTO CALIBO SO LLLC
1100 Alakea Street, Suite 3100
H onolulu, HI 96813
Counsel for AES HAW AII, INC.
RICHARD W ALLSG ROVE
PROGRAM DIRECTO R
BLUE PLANET FO UNDATIO N
55 M erchant Street, 17th Floor
H onolulu, HI 96813

Page 4
G ERALD A. SUM IDA
TIM LUI-KW AN
ARSIM A A. M ULLER
CARLSM ITH BALL LLP
ASB Tower, Suite 2100
1001 Bishop Street
H onolulu, HI 96813
Counsel for ULUPO NO INITIATIVE LLC
CO LIN A. YO ST
1003 Bishop Street
Pauahi Tower, Suite 2020
H onolulu, HI 96813
Counsel for HAW AII PV CO ALITIO N
SCO TT G LENN
CHAIR, HAW AII CHAPTER
SIERRA CLUB
P.O . Box 2577
Honolulu, HI 96813
ISAAC H. M O RIW AKE
KYLIE W . W AGER
EARTHJUSTICE
850 Richards Street, Suite 400
H onolulu, HI 96813-4501
Counsel for SIERRA CLUB
DEAN T. YAM AM OTO
TYLER P. M cNISH
H onolulu, HI 96813
Counsel for PANIO LO POW ER CO M PANY, LLC

Page 5
DEAN T. YAM AM OTO
TYLER P. M cNISH
H onolulu, HI 96813
Counsel for EURUS ENERG Y AM ERICA CO RPORATION
SANDRA-ANN Y.H. W ONG
LAW O FFICE O F SANDRA-ANN Y.H. W ONG
1050 Bishop Street, #514
H onolulu, HI 96813
Counsel for SUNPOW ER CO RPORATION
JO SEPH K. KAM ELAM ELA
CO RPORATIO N CO UNSEL
ANG ELIC HALL
DEPUTY CO RPORATION CO UNSEL
CO UNTY O F HAW AI'I
101 Aupuni Street, Suite 325
H ilo, HI 96720
Counsel for COUNTY O F HAW AI'I
FIRST W IND HO LDING S, LLC
810 Richards Street, Suite 650
H onolulu, HI 96813
CHRIS DeBO NE
ACTING PRESIDENT
DISTRIBUTED ENERG Y RESO URCES CO UNCIL OF HAW AII
99-1350 Koaha Place
Aiea, HI 96701
LESLIE CO LE-BRO OKS
EXECUTIVE DIRECTO R
DISTRIBUTED ENERG Y RESO URCES CO UNCIL O F HAW AII
P. 0. Box 2553
H onolulu, HI 96813

Hawaii PUC Decision and Order No. 34696, July 14, 1017

Recommended

Recommended

More Related Content

Similar to Hawaii PUC Decision and Order No. 34696, July 14, 1017

Similar to Hawaii PUC Decision and Order No. 34696, July 14, 1017 (20)

More from Honolulu Civil Beat

More from Honolulu Civil Beat (20)

Recently uploaded

Recently uploaded (20)

Hawaii PUC Decision and Order No. 34696, July 14, 1017