PUC, HECO presentations
Upcoming SlideShare
Loading in...5
×

Like this? Share it with your network

Share

PUC, HECO presentations

  • 2,208 views
Uploaded on

The PUC and HECO made presentations to state lawmakers, Jan. 29, 2013.

The PUC and HECO made presentations to state lawmakers, Jan. 29, 2013.

More in: News & Politics
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
2,208
On Slideshare
874
From Embeds
1,334
Number of Embeds
6

Actions

Shares
Downloads
32
Comments
0
Likes
0

Embeds 1,334

http://www.civilbeat.com 1,089
http://m.civilbeat.com 187
http://www.upwhawaii.org 54
http://upwhawaii.org 2
http://beta.upwhawaii.org 1
https://www.google.com 1

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. Hawaii Public Utilities CommissionFactors Affecting Hawaii Electricity Rates &Historical Trends and Future Perspectives Informational Briefing: Senate Committees on Commerce & Consumer Protection and Energy & Environment January 29, 2013
  • 2. Why Are Electric Utilities Regulated? The Regulatory CompactThe regulated company is protected fromcompetition within a designated service territory,and in return, the regulated company is requiredto provide service to all who need it within reason.The services provided by the regulated companyare to be of good quality, safe, and reasonablypriced, and in return, the regulated company isallowed the opportunity (not a guarantee) to earna “fair” rate of return for its investors. 2
  • 3. 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, RecessionaryResults in ConditionsAverage Electricity Customer Rate 3
  • 4. 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
  • 5. 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
  • 6. Hawaii’s Electricity RatesHistorical Trends and Future Perspectives
  • 7. 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
  • 8. 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 36,000Sales (GWh) 7,242 1,181 1,104 435Capacity (MW) 1,786 290 287 122Avg Use/Customer (kWh) 23,564 17,369 13,771 11,995Distribution Lines (Miles) 2,294 1,500 3,212 781 8
  • 9. HECO (Oahu) Electric Revenues: 2002 – September 2012 Cumulative $ Millions Increase $1,370 $1,135 220% Energy Costs Base Rates $235 70% Electric sales declined 5% over 10-year period. Thus, all of the cumulative revenue increase is due to rate increases. 9
  • 10. HECO (Oahu) Energy Cost Revenues: 2002 – September 2012$ Millions $/Barrel Cumulative Increase $1,135 $830 350% Oil Price Utility Fuel Costs $305 IPP Power Costs 105% Utility and IPP generation output remained essentially unchanged over 10 years at a 60%/40% mix, respectively. 10
  • 11. Average Power Supply Costs: HECO Companies vs IndependentPower Producers (Cents/kWh) Power Supply HECO MECO HELCO Provider Utility Generation (1) 24.8 28.1 32.1 IPP Generation (2) 18.0 17.1 23.9 1) Cost estimate based upon actual 2011 fuel cost, generation operation and maintenance expense, generation-related annual depreciation expense, proration of utility net operating income related to generation net plant investment and fuel inventory plus applicable income and revenue taxes divided by total utility generation output. Excludes any allocation of utility A&G expenses such as power plant employee pension and benefits or property insurance expenses, etc. 2) Cost estimate based upon 2011 actual purchased power capacity and energy expense plus revenue taxes divided by total electricity sold to utility. 11
  • 12. HECO (Oahu) Base Rate Cost Drivers: 2002 – September 2012Index(2002 = 1.00) O&M Expenses(1) A&G Salaries Average Base Rates Rate Base Investment Electric Sales 1) Additional amounts of O&M expenses were capitalized, rather than expensed, in 2011 and 2012 due to accounting changes. Otherwise, O&M expense levels would have been higher in those two years. 12
  • 13. Electric Utility Rate Cases and Awards: 2005 – 2012 HECO MECO HELCO Total KIUC Number of Rate Cases 4 3 2 9 1 Cumulative Rate Increases Requested 409 75 71 554 13 ($ millions) Cumulative Rate Increases Granted 247 31 29 307 3 ($ millions) Increases GrantedAs 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
  • 14. Impact of Rate Increases on Average HECO (Oahu) ResidentialCustomer: 2002 – September 2012 Average Monthly Bill vs Average Monthly Usage Bill ($) Usage (kWh) Electricity Usage Electric Bill 14
  • 15. 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
  • 16. Authorized vs Actual Rate of Return on Common Equity forHECO (Oahu): 2002 – September 2012 Return on Average Common Equity % Authorized Actual 16
  • 17. Actual Rate of Return on Common Equity: 2002 – September 2012 %12.0010.00 HECO 8.00 HELCO MECO 6.00 4.00 2.00 2002 2004 2006 2008 2010 2012 17
  • 18. 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
  • 19. 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
  • 20. NEIL ABERCROMBIE STATE OF HAWAII KEALI`I S. LOPEZ GOVERNOR OFFICE OF THE DIRECTOR DIRECTORSHAN 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
  • 21. Informational BriefingSenate Committee on Commerce and Consumer ProtectionSenate Committee on Energy and EnvironmentTuesday, January 29, 2013, 8:30 a.m.Page 2adoption of more and more renewable energy was not difficult. Today with stable oilprices, the Consumer Advocate is concerned that the state will lose its momentum andits 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 perkwh, but fell on Maui and Kaua’i. This overall slight decline in rates over the last fourmonths is due to the drop in oil prices. In an interview with a Honolulu Star-Advertiser reporter, energy consultantProfessor Fereidun Fesharaki stated that his long-term price forecast for oil is $30 perbarrel less than it is today. He indicated that oil prices will start to decline by around2015, going down to $80 per barrel, then staying at that level for a number of years. Hewent so far as to say that oil prices may go even lower than that. Professor Fesharakioffered similar opinions in his report on liquefied natural gas (“LNG”) that wascommissioned by Hawaii Natural Energy Institute (“HNEI”). If oil prices decline as Dr. Fesharaki predicts, will State policymakers lose themomentum toward renewable energy resources that may be priced higher than the costof generating electricity using oil? Will our concern for current electricity prices delay orkill the adoption of renewable energy projects? Do we wait out the next five years andstay the course using oil to generate electricity in the hope that oil prices will decline asDr. Fesharaki predicts? We need to keep in mind that not every oil price forecaster is thinking that oilprices 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 ourfuture by staying on what has been rising and volatile oil prices. We need to pushtoward the state’s Renewable Portfolio Standards (“RPS”) and Energy EfficiencyPortfolio Standards (“EEPS”) goals. The Consumer Advocate is not oblivious to the current economic hardshipsHawaii’s citizens are facing with the high cost of electricity. So what is the ConsumerAdvocate doing to keep electricity prices down? First, in every electric utility rate case, the Consumer Advocate scrutinizes everyexpense item, every new employee, every pay raise. We retain one of the most wellrespected consultants in the country – Utilitech, Inc.. We scrutinize each of the electricutilities investments to determine if the utilities have sustained their burden of provingthat there is a net benefit to ratepayers in making the investment.
  • 22. Informational BriefingSenate Committee on Commerce and Consumer ProtectionSenate Committee on Energy and EnvironmentTuesday, January 29, 2013, 8:30 a.m.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 notdropped significantly as they have on the mainland. Why are Hawaii’s wind and solarPPAs consistently priced at 20 cents per kwh when on the mainland we see prices thatare 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 thepricing term of the contract that was indexed to mainland biodiesel prices, becausemainland biodiesel prices tend to follow petroleum prices. Ultimately, for that particularcontract, we did not object to the pricing terms, because the term of the contract was fora relatively short three years. We will continue our commitment to see PPA pricing atfixed prices. Fourth, we push for on-bill financing as a means of providing moderate to lowincome households and renters access to the benefits of solar photovoltaic (“PV”)systems that would lower monthly electricity bills and save on the amount of electricitythat has to be generated by the utility using oil. Energy efficiency should not be for thewealthy only. There are too many homeowners in Hawaii who do not have thenecessary up front cash to pay for a PV system. A well-designed on-bill financingprogram that allows consumers to pay for the installation of a solar pv system throughthe electricity cost savings achieved by such a system is key to moving the state towardgreater distributed renewable energy generation by allowing greater public participation. Fifth, although the Consumer Advocate understands the importance ofrenewable energy projects, the Consumer Advocate will not ignore the potential costsavings that might be achieved if the state moves toward LNG as a fuel source forelectricity generation. Thus far, the studies done by HNEI, HECO, and Hawaii Gasindicate that LNG offers Hawaii consumers a very real opportunity to see lowerelectricity rates. The technical, regulatory, and infrastructure challenges of LNGimportation to Hawaii are extremely difficult to assess. The Consumer Advocate willtake 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 ofwhat the future holds for Hawaii’s consumers. We have to consider the long-termeffects of what we do and which projects are approved. We cannot reject renewableenergy projects simply because they cause an increase electricity bills today, if thoseprojects will result in stable prices that are lower than the Department of Energy’sforecasted price of oil in the future. Furthermore, costs need to be balanced against the
  • 23. Informational BriefingSenate Committee on Commerce and Consumer ProtectionSenate Committee on Energy and EnvironmentTuesday, January 29, 2013, 8:30 a.m.Page 4State’s goal of energy sustainability and independence; the electric utilities need toprovide reliable and safe service; the State’s need to create jobs and stimulate theeconomy; the desire to have community acceptance over all projects; and the need tomaintain a clean and healthy environment. Thank you for this opportunity to testify.
  • 24. 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
  • 25. 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
  • 26. 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
  • 27. Informational Briefing Senate Committee onCommerce and Consumer Protection Senate Committee on Energy and Environment Tuesday January 29, 2013
  • 28. 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
  • 29. Hawaii Island electric bill (as of 1/2013) WHAT DOES YOUR HOW MUCH DO WE MONEY PAY FOR? MAKE ON IT? POWER FROM INDEPENDENT PRODUCERS 0% 30 % FUEL OIL 0% 28 % OPERATIONS, CUSTOMER SERVICE, DEPRECIATION, ADMINISTRATIVE, INTEREST AND ENERGY EFFICIENCY 0% PROGRAM COSTS 28 % TAXES 11 % 0% NET INCOME 3 % 3
  • 30. Maui electric bill (as of 1/2013) WHAT DOES YOUR HOW MUCH DO WE MONEY PAY FOR? MAKE ON IT? POWER FROM INDEPENDENT PRODUCERS 0% 12 % FUEL OIL 50 % 0% OPERATIONS, CUSTOMER SERVICE, DEPRECIATION, ADMINISTRATIVE, INTEREST AND ENERGY EFFICIENCY 0% PROGRAM COSTS 25 % TAXES 9% 0% NET INCOME 4 % 4
  • 31. 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 MESSAGESService PeriodPrevious 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 PowerPaymen~ $216.43· wannlng.OUTSTANDING BALANCECurrent Charges $203.76 $tI.OO e.l.brlll. Earth Day iIInd plant. nativ. tree. Trau absOfb C02 wtlleh ean *p In the flgtl1l1GlIlMt global warming. make up $126.50 of this $203.76 $0.00AdjustmentsCu".nt ChclrgnTOTAL 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
  • 32. Historical Fuel Prices Low Sulfur Fuel Oil vs. Crude Oil December 2010 to December 2012Price per BBL HAWAII OIL PRICES CRUDE OIL PRICES Hawaii oil prices based on Hawaiian Electric low sulfur fuel oil inventory prices 6
  • 33. 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
  • 34. 2011 Consolidated Taxes to State and County 3% • Revenue Taxes $264M • GET on Fuel & PP $58M • Income Taxes $lOM ______ $332M Hawaiian Electric Company Maui Electric Company Hawaii Electric Light Company 8
  • 35. 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
  • 36. Lowering customer bills (2008 Clean Energy Agreement) Short Term Long TermALL 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 scaleSELF-SELECTING Demand Response/Load Management CUSTOMERS Solar Water Heating PV/NEM Time-of-use Rates Lifeline Rates Electric Vehicle (EV) Tariff 10
  • 37. Lowering customer bills (New Day Plan) Short Term Long TermALL CUSTOMERS Renewable Energy esp. larger scale projects esp. wind, geothermal, biofuels, biomass, and OTEC Inter-island cable Avoided cost contract renegotiation Energy Efficiency Portfolio Standard Statewide Rates (for Neighbor Islands) Energy Efficiency EVs on a large scaleSELF-SELECTING Demand Response/Load Management CUSTOMERS On-Bill financing of solar water heating PV/NEM Time-of-use Rates Lifeline Rates Electric Vehicle (EV) Tariff 11
  • 38. Lowering customer bills (2012 and onwards) Short Term Long Term Rethink bidding processALL CUSTOMERS Renewable Energy Waivers from bidding by price esp. larger scale projects 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 Energy Efficiency EVs on a large scaleSELF-SELECTING Demand Response/Load Management CUSTOMERS On-Bill financing of solar water heating PV/NEM Time-of-use Rates Lifeline Rates Electric Vehicle (EV) Tariff Bill payment options Pre-paid meters 12
  • 39. Percent Renewable Generation - 2012 Oahu Hawaii Maui County __.....--""~~O~ 1% ConsolidatedThis is based on • RE Generationsystem netgeneration and the • Fossil GenerationREdoes not (Uti lity)include self-generation. • Fossil Generation (Non - Utility - hatched) Hawaiian Electric Company Maui Electric Company Hawaii Electric Light Company 13
  • 40. Hawaii’s Renewable Energy Story Chapter Hawaii Electric Light Maui Electric Hawaiian ElectricThe 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
  • 41. 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 EM15
  • 42. Cost ($/kWh) Cost of Generation – Hawaii Island o o o o o o o o o o o ~ ~ N N w w ~ o <.n o <.n o <.n o <.n o HELCO generation (Average) HELCO generation (Marginal PPA 1 - IMnd OJ OJ 00 PPA2 - Geothermal CD c.. ~ PPA3 - Geothermal o PPA4 - Geotherm al :::l m x §: ,," PPA5- Oil o CD <0 () PPA6- Hydro CD " " 3 ::I:S:::I: " " PPA7 - IMnd III III III 0- ~ :, :e PPA8 - Sotar CD -. =: m !!!, N m - iii m Oth er « 100 kW) o iD~::::J ::::J -->. n:::-m ~ ------------------~ N s: n 1Il no- ~ < FIT Ti er 1 - IMnd "Tl c r o:::!, 00 FIT Ti er 2 - IMnd CD cO 3 n o ~ ::::J" C 0 n FIT Tier 1 - PV "U _1110 ~ :::::! . () 0::::J3 FIT Tier 2 - PV 0<C CD 00 3 III FIT Tier 3 - PV C III ::::J < "T1 FIT Tier 1 - Hyd ro 0 -. ~ ~ m I FIT Tier 2 - Hydro 5:: m r FIT Tier 1 - CSP o FIT Tier 2 - CSP o FIT Tier 3 - CSP Commercial NEM Residential NEM Z <1> _ <0" 2." Qi. Ul PPA9 - Biomass 5-::;- " "16
  • 43. Cost ($/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 EM17
  • 44. Monthly Savings with Wind - Maui Residential 18
  • 45. Hawaiian Electric ConsolidatedCumulative 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
  • 46. 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---------------------~--------"C1"11 0130..... +----------------{--------------------------- ------- ~... 120 +--------------+-------------------------------+------">Vl 110 +-------------1-------------------------------------- 100 +---~----_.~-------------------------------------- 90 +--------------------------------------------------- 80 r---,-_,--_,---,--,---,-_,~_,--_,--,,--,_--,__,--_, <1S8 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 Hawaiian Electric Company Maui Electric Company Hawaii Electric Light Company 20
  • 47. 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
  • 48. HELCO’s “Loading Order” - Night Customer Load Conservation / Energy Efficiency Megawatts Power Waiau & Puueo Hydro - 4.1MW Tawhiri Wind – 7 MW Wailuku River Hydro – 12.1 MW PGV Geothermal – 22 MW HRD Wind – 10.5 MW Tawhiri Wind – 13.5 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 22
  • 49. How does the Loading Order workas customer load decreases? Conservation / Energy Efficiency Customer Load 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 – 25 MW Hill & Puna Steam – 34 MW Keahole – 58 MW HEP – 60 MW 23 Diesels – ~56 MW
  • 50. HELCO’s “Cost Order” (Jan 2013) Conservation / Energy Efficiency PGV Geothermal – 8 MW Cost of Each Resource (highest to lowest cost) Hu Honua Biomass – 25 MW Hill & Puna Steam – 34 MW Keahole – 58 MW Solar PV (T 1/2 FIT) – 1 MW Tawhiri Wind – 7 MW Tawhiri Wind – 13.5 MW HRD Wind – 10.5 MW Avoided Cost Rates Waiau & Puueo Hydro - 4.1MW Wailuku River Hydro – 12.1 MW PGV Geothermal – 30 MW HEP – 60 MW Diesels – ~56 MW Keahole Solar CSP – 1 MW Solar PV (NEM) – 20 MW 24
  • 51. 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
  • 52. 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
  • 53. 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
  • 54. 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
  • 55. Maui Electric costs have increased while sales base has fallen to 2002 levels GWH Sales Non-Fuel Operations & Maintenance Expense1,300 $70 $65 1,280 1,266 1,248 1,252 $60 $55 $571,250 1,239 $51 $50 $50 1,2071,200 $39 $41 1,192 1,192 1,181 $40 $37 $38 $34 $34 1,1591,150 $30 1,134 $201,100 $101,050 $0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 29
  • 56. 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 500kWh/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
  • 57. Mahalo 31
  • 58. Progress on renewablesOver the next three years, nearly 37 megawatts of power generated by renewable resources will come online on Kaua‘ That’ in addition to 1 megawatts already in production from hydroelectric generation i. s 4and 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. . SDetails of projects in 2013:At Anahola, KI UC, in partnership with the Department of Hawai‘ ian Home Lands and the HomesteadCommunity Development Corp.is building a 1 , 2 megawatt, $ 0 million solar energy park This proj 5 . ectwill also include a service center and baseyard.150 construction jobsKI 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 jobsGreen Energy Team of Kaua‘ is building a $ 0 million power plant that will burn woodchips from locally i 9grown trees.The plant will replace nearly 3. million gallons of oil now imported by KI 7 UC.200construction jobs,39 perm anent jobsAbout 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 Eproposed sites are built, they represent another 1 megawatts of firm, clean power. 5Kaua‘ renew ables scorecard iExisting 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. 3Under 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 4Total by end of 2014 36. 7 23. 8%