HELCO, Hu Honua eye new deal

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Hawaii Electric Light Co. and Hu Honua Bioenergy have come to a tentative agreement on a new power purchase contract.

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Hawaii Electric Light Co. and Hu Honua Bioenergy have come to a tentative agreement on a new power purchase contract.

In a written statement issued Wednesday, Hu Honua said HELCO agreed to revised terms for electricity to be produced by the half-completed Pepeekeo biomass power plant, which has experienced significant construction delays and is currently on hold.

Hu Honua submitted the amended contract to the state Public Utilities Commission on Tuesday, seeking the panel’s approval for preferential price rates provided by law for renewable energy produced in conjunction with agricultural activities.

Harold Robinson, president of Island BioEnergy, Hu Honua’s parent company, said Hu Honua is proposing to sell electricity to HELCO at 8 cents per kilowatt-hour to start.

“I’m pretty sure it’s one of the lowest, if not the lowest, price offered by a stand-alone renewable project right now out in the market,” Robinson said Wednesday. He added any price changes over time will be tied to the nation’s gross domestic product.

“We’ve gotten away from something that’s linked to the volatility in the price of oil and linked it to the U.S. economy,” he said. “… You can look at this index for the past 30 years and see that it is much smoother than the vast fluctuations in the oil index.”

HELCO President Jay Ignacio confirmed Wednesday the utility has come to agreement with Hu Honua “with exception to price, and we’re filing the amended contract with the commission.”

Ignacio said the contract terms are being run through a computer simulation model to determine if the proposed deal is a good one.

“In this case, it’s a proposed 30-year contract. That takes awhile,” Ignacio said. “So, even if we put that before the commission, we’ve not completed our analysis of the pricing.”

According to Ignacio, HELCO will file its analysis of the proposal with the commission “at a later date.”

“This is something that has to be vetted before the Public Utilities Commission, and they have the authority to decide if it is indeed a preferential rate,” he said.

HELCO and Hu Honua are asking the PUC to fast track the amended power purchase agreement and issue a decision by July 3.

The parties originally entered into a 20-year deal 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.

The biomass plant, which faced significant delays because of 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.

Hu Honua still has an active federal antitrust lawsuit against HELCO and its parent companies, Hawaiian Electric Co. and Hawaiian Electric Industries, plus Hamakua Energy Partners and NextEra Energy, accusing HELCO of improperly terminating the power purchase agreement. HELCO countered that Hu Honua failed to meet agreed-to construction deadlines by significant amounts of time.

A hearing is set for 10 a.m. May 22 on a HELCO motion for dismissal of the suit and an order to compel arbitration of all claims, and a settlement conference also is scheduled for May 18-19, according to court records.

Ignacio declined to say what effect the proposed contract, if approved by the PUC, would have on the antitrust suit.

Robinson, however, said if Hu Honua and HELCO come to terms on price and PUC approves the amended contract, “the lawsuit, with regard to the utility, will go away.”

Robinson said he’s “not at liberty to talk about” the other defendants — NextEra, whose proposed $4.3 billion merger with HEI was rejected in June 2016 by the PUC, or Hamakua Energy Partners, whose proposed $84.5 million sale of its fossil-fuel power plant to HELCO was nixed by the PUC on May 4.

“But ultimately, the idea is for us to end up with a settlement and get the lawsuit behind us so we can focus on producing energy,” he said.

Ignacio said the timing of the Hu Honua filing has nothing to do with the PUC’s denial of HELCO’s proposed Hamakua Energy Partners power plant purchase.

“We’ve been having ongoing discussions with Hu Honua, and this is independent of that particular decision,” he said.

Ignacio said HELCO is producing enough energy to fulfill the island’s needs for the foreseeable future, but having Hu Honua online would be a step toward the state’s mandate of 100 percent renewable energy production by 2045.

“Once it’s proven reliable and dependable, then we can turn and look at our own fossil-fuel units that are online and maybe retire those. That’s the benefit,” he said.

According to a May 9 letter to the PUC by Joseph P. Viola, Hawaiian Electric’s vice president for regulatory affairs, the consulting firm PricewaterhouseCoopers said Hu Honua has a billionaire backer who committed $125 million to the project if the PUC approves the amended agreement.

Robinson declined to name the financier.

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“But I can tell you that the project is fully financed, and as soon as we start construction, we’ll be pushing to finish by the end of 2018,” he said.

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

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