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HELCO seeks arbitration in Hu Honua suit

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Hawaii Electric Light Co. and its parent companies, Hawaiian Electric Co. and Hawaiian Electric Industries, are asking a judge to dismiss a federal antitrust lawsuit against them by Hu Honua Bioenergy and compel arbitration of all claims.

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Hawaii Electric Light Co. and its parent companies, Hawaiian Electric Co. and Hawaiian Electric Industries, are asking a judge to dismiss a federal antitrust lawsuit against them by Hu Honua Bioenergy and compel arbitration of all claims.

The motion, filed Feb. 16 in U.S. District Court in Honolulu, asks in the alternative that the court suspend proceedings in the lawsuit until arbitration is completed. A hearing on the motion is set for 10 a.m. May 22 before Chief Judge J. Michael Seabright.

A settlement conference also is scheduled for May 18 and 19, according to court records.

Hu Honua’s suit claims HELCO declined an offer of 14 cents per kilowatt-hour to restore the agreement. That offer would have increased the annual payment to $2 million, but would have saved ratepayers $90 million through 20 years, according to Hu Honua.

The parties entered into a 20-year agreement in 2013 that called for HELCO to pay $1 million a year plus electrical costs of 21.5 cents per kilowatt for the first 10 megawatts, with a declining price scale for energy purchased above that amount.

According to HELCO’s motion, the power purchase agreement “includes an alternative resolution provision requiring the arbitration of all claims arising out of or relating to the (agreement).” The motion claims since all of Hu Honua’s claims “arise out of or are related to the (agreement), they are all subject to binding arbitration” and the court must dismiss due to “lack of subject matter jurisdiction” over the claims.

The utility’s filing claims Hu Honua “failed to properly construct the facility as required by the (agreement) and missed multiple agreed-to deadlines by significant amounts of time. The motion said the termination of the agreement occurred only after HELCO gave Hu Honua “numerous notices and multiple opportunities to cure its defaults.” It also accuses Hu Honua of making “a number of specious claims along with its breach of contract claim in an apparent effort to get around the mandatory alternative resolution language ….”

Hu Honua filed an amended complaint on Jan. 27 to its Nov. 30 civil suit, which also names NextEra Energy and Hamakua Energy Partners as defendants. The suit seeks treble damages for the $120 million dollars invested in the half-completed biomass power plant and $435 in lost profit.

The complaint alleges the utility unlawfully terminated its power purchase agreement with Hu Honua — which went through lawsuits with contractors and vendors and labor disputes during the construction process — and rejected several offers to reduce power costs and extend deadlines, delaying the project by 20 months.

Hu Honua also claims NextEra, whose proposed $4.3 billion merger with HEI was rejected in June 2016 by the state Public Utilities Commission, “exerted total control over HECO’s/HELCO’s conduct of their important business actions and material agreements, including the fate of Hu Honua’s (power purchase agreement),” even though the merger proposal hadn’t been approved. The intent of the termination, according to the lawsuit, was to increase HELCO’s control over power production by reducing the number of independent power producers on the island.

The biomass plant, which faced significant delays because of the contractor and union jurisdiction disputes, was expected to go online in January 2016 with 21.5 megawatts of electricity, or about 10 percent of the island’s energy needs.

“Right now, Hu Honua is continuing discussions with HECO/HELCO in order to address key issues and to reinstate the (power purchase agreement),” Hu Honua spokeswoman Ashley Kierkiewicz said Wednesday in a written statement.

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HELCO President Jay Ignacio declined comment earlier this month, citing the “ongoing litigation.”

Email John Burnett at jburnett@hawaiitribune-herald.com.

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