And now on to an issue near and dear to all of our hearts–power utility operation! Most of Maui Electric Company’s (MECO’s) 70,000 or so customers probably don’t give the utility much thought (except maybe when the bill arrives), but the County of Maui itself is very interested in the matter right now. So much so that it spent $70,000 commissioning the Oklahoma City-based engineering firm Guernsey to do a report on alternative public power ownership models. That report dropped on Friday, Jan. 15, and says the county should indeed get an Independent Systems Operator (ISO) or Regional Transmission Operator (RTO) to “oversee the county’s electric grid and energy market,” according to a county news release.
“There’s always a bottom line for a private utility,” Mayor Alan Arakawa said in the county’s press release. “Their decisions are influenced by making a profit, whereas an ISO’s only duty is being fair to the consumers and making sure our electrical grid is reliable and efficient, as well as renewable friendly. This community is more than ready for an electrical utility model where they–the ratepayer–is the bottom line.”
There is truth in what Arakawa–unlike a co-op, a public utility like MECO (whose parent company Hawaiian Electric Industries is preparing to merge with Florida-based NextEra Energy) is typically oriented towards shareholder interests above all else. And the 241-page report, dated Dec. 23, 2015, makes this explicitly clear, especially when discussing Guernsey’s (and the county’s) view that MECO just doesn’t have what it takes to fulfill the state requirement that all of our energy come from renewable sources by 2045.
“The vision presented by the [Hawaii Public Utilities Commission] PUC, and reinforced by both the Governor of Hawaii and Mayor of Maui County, is of a different kind of grid wherein there are a greater number of points of generation, including residential and commercial customers,” states the report. “In this model the utility service [MECO] is an enabler of self-generation; the present Investor-Owned-Utility (IOU) structure is contrary to the new vision. An IOU is responsible to its shareholders, not the ratepayers, and uses a cost-of-service model where profits are provided through return on capital investment.”
To be sure, the report doesn’t recommend that the county completely take over everything MECO owns and does–only that it create an ISO or RTO that would “oversee the electric grid and energy market while ensuring a reliable power supply, adequate transmission infrastructure, competitive wholesale prices and fair access for renewable power.” Such an entity would then “need to acquire existing dispatch, monitoring and control equipment in order to manage the transmission/distribution system,” while power generators and distribution lines would stay with MECO.
This could be pricey–“from a low of $525 million (book value) to a high of $867 million,” the report states. The report notes that such a system would be better committed to providing more renewable energy and “on average, cooperatives and public power utilities have lower retail rates than investor-owned utilities.”
One thing to keep in mind here is that right now, the County of Maui and MECO aren’t really getting along. This is largely due to MECO’s unwillingness to go along with the county’s big waste-to-energy proposal.
“One of the driving factors behind the exploration of alternatives to MECO is the resistance to two proposed base-load renewable energy projects developed by Anaergia Services LLC (Anaergia),” states the Guernsey report. “The situation has deteriorated over the past year such that Anaergia filed a complaint on September 9th, 2015 with the PUC stating that MECO was not complying with PUC direction to enable renewable projects. Anaergia also alleged MECO refused and failed to forward requests for preferential rates for the purchase of firm renewable energy produced from agricultural crops to the PUC for approval, as required by law. MECO countered that pricing was too high for both projects, and would have resulted in increased costs to customers. Without significant analysis, it is difficult to say which party is correct (or more correct).”
Which is part of the reason why MECO apparently wasn’t at all pleased with the Guernsey report’s recommendation. “Any credible analysis of alternative utility ownership models or market structures must recognize that such efforts are complex, time consuming and costly and may in fact increase rates for electric customers with no guarantees of improvements in reliability or integration of renewable energy,” stated the company, according to a Jan. 15 Maui Now story. And if the county is thinking about using eminent domain powers to take over MECO’s dispatch and control equipment (Senator Gil Keith-Agaran says he’ll soon introduce legislation to clarify the powers Hawaii’s counties hold in terms of condemning public utility property), the utility did some serious finger-wagging.
“We haven’t reviewed the proposed legislation regarding eminent domain so we cannot yet comment on the specific proposal, but any effort by the County to acquire Maui Electric through eminent domain or taking the assets of an electric utility would not be simple or fast–or cheap,” MECO said, according to Maui Now. It would include multiple time consuming steps, considerable uncertainty, and greater expense for legal proceedings.”
But Sierra Club Hawaii Director Marti Townsend loves the Guernsey Report’s recommendations. “We agree with the conclusions of Maui County’s study, that the people of Maui should seek a new electric utility model, which may include pursuing public ownership of the utility,” she said in a Jan. 15 Sierra Club Hawaii press release. “Here on the clean energy leading edge in Hawai`i, large investor-owned utilities are dinosaurs. It makes more sense for our environment and our economy to manage our electrical grid as a shared resource and encourage as much competition as possible to give ratepayers what they want: clean, cheap energy.”
Looks like we’ll be in this fight for some time.
Click here to read the Guernsey Report.
Photo: Airarcs/Wikimedia Commons