Posted on: Sunday, July 18, 2004
Electricity costs frustrating but unlikely to change soon
| • | Chart: Comparative residential electrical costs in Hawai'i |
By Jan TenBruggencate
Advertiser Science Writer
Many have come to accept that reliable electrical power in a place as small and isolated as Hawai'i means they're stuck having to pay more than the residents of any other state. In most cases, far more.
Some residents are reeling from the financial hit.
"We are being slaughtered," said Hanalei resident Ray Chuan. He said the fuel-cost adjustment in his Kaua'i Island Utility Cooperative (KIUC) bill was the most significant factor in the nearly 35 percent increase in his electric costs from August 2003 to June 2004.
John E. Cole, the new executive director of the state Division of Consumer Advocacy, which speaks on behalf of consumers when the utilities appeal to the state Public Utilities Commission for new rate schedules, said he believes that Hawai'i's rates are generally "acceptable," given the kinds of power systems that are in place.
Residents like Chuan disagree.
Chuan said he believes the energy adjustment is being improperly applied to gouge consumers.
The state's electric utilities say their PUC-approved rate schedules accurately represent the changes in their costs for fuel and properly reimburse them for their outlays for fuel. Figures from Maui Electric show an 88 percent increase in the fuel adjustment from June 2003 to last month. KIUC figures show a 58 percent increase. O'ahu had just a 0.1 percent increase.
"A lot of it has to do with the price of oil. It also has to do with the kind of generators they have. And the land area they have to cover," Cole said.
Hawaiian Electric spokeswoman Lynn Unemori said the O'ahu utility benefitted from primarily using low-sulfur residual fuel oil, which has not risen in price as much as other types of fuel. As a result, Hawaiian Electric consumers saw a fraction of a percent fuel-adjustment increase and less than a 1 percent increase in overall power rates from June 2003 to June 2004. (An Advertiser story July 11 that referred to a 10 percent increase during that period was in error.)
But Neighbor Island power consumers uniformly saw dramatically higher power bills, partly because they depend largely on fuels that have risen fast in price — mainly diesel.
Unemori said that China seems to be using more diesel, and some Mainland utilities have recently begun using more diesel because of increases in the cost of natural gas. That has increased demand and thus increased prices.
Walt Barnes, chairman of KIUC board of directors strategic planning committee, said that the Islands have little choice but to depend on oil-based fuels, and to pay high prices.
"We're pretty much stuck with petroleum fuel. It is easy to transport. But it is not very efficient. Only about 5 percent of U.S. electricity is generated from (oil-based fuels). Coal and nuclear generate the most, and then natural gas.
"It's not the best fuel to use, but it is the best fuel to use in Hawai'i because of transportation issues," Barnes said.
Others say there is plenty of evidence to the contrary. Henry Curtis, executive director of the environmental group Life of the Land, said PUC-approved utility rate structures encourage excessive fuel use, even though redesign of power plants, renewable fuels and private power produces are capable of producing electricity cheaper.
"The utilities are given increased profits for what they build rather than for promoting conservation and renewables. We need a new rate structure that separates sales from profits, otherwise there is no incentive for them to change they way they do things. Their profits are tied to what they sell," Curtis said.
The Islands suffer from being small communities. Small generating plants tend to be less efficient than bigger ones. Even within Hawai'i, the islands with the biggest demand have the biggest plants, and generally lower rates.
"Smaller units are much more expensive per megawatt of capacity to build, and much more expensive per megawatt delivered to operate," Barnes said.
Island power rates are also higher because of isolation. Most Mainland power companies can buy power from connected neighboring utilities if, for instance, a generator breaks down. In Hawai'i, each island must have additional generating capacity in place — called "spinning reserve"— in case it loses a big generators. And ratepayers foot the bill for the unused capacity.
Power companies have "high capital costs that, regulatorily, they are allowed to recapture," Cole said.
Kaua'i residents' rates are particularly high because they have the additional burden of two hurricanes: Hurricane Iwa in 1982 and Hurricane 'Iniki in 1992. The island's consumers were still paying off the cost of rebuilding the electrical grid after the first storm when the second one hit with an additional $60 million in costs.
"We have those hurricane repairs in our rate base," Barnes said. "Kaua'i's rates are still recovering. There is a 20 to 25-year depreciation schedule."
Curtis said that if the state can think outside the box, there's a brighter future for electrical rates. He mentioned some ideas: Renewable energy like wind is cheaper now than oil-fired power; sophisticated co-generation plants — some are operating in Hawai'i — can reap far more energy out of fossil fuels than current systems; the utilities wouldn't need so much spinning reserve if they took advantage of diesel generators in emergencies; almost all the electric utility contracts with private producers providing power cheaper than they can produce it themselves.
But it's hard to convince the utilities.
Said Barnes: "Most of the things we can do are more expensive than using oil."
Reach Jan TenBruggencate at jant@honoluluadvertiser.com or (808)245-3074.
