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The Honolulu Advertiser
Posted on: Tuesday, January 31, 2006

Energy plan touts $6.3B in savings

By Kevin Dayton
Advertiser Staff Writer

If calculations the Lingle administration has offered in support of its new strategic energy plan are correct, then never mind the $574 million state surplus.

That's loose change compared to the energy money at stake this year at the state Legislature.

The administration claims the economy will benefit by at least $6.32 billion over the next 14 years if lawmakers adopt Lingle's energy proposals, money officials say would remain here instead of leaving Hawai'i as payments for imported oil.

For a taxpayer subsidy of less than $2 million a year, plus some spending to make new state buildings more energy efficient, Lingle contends the resulting energy savings will eliminate the need to import 110 million barrels of crude oil.

To put that in context, Hawai'i imported about 51 million barrels in 2004, so the savings over the 14-year period would equal more than two years of imports.

The Lingle energy plan is drawing praise from Henry Curtis of Life of the Land, who has lobbied the Legislature on energy issues. However, Curtis estimated about half of the savings the administration is projecting actually would come from laws already in place.

The governor's calculations include savings from the 2004 renewable portfolio standards law that requires utilities to obtain at least 20 percent of their power from renewable sources. It also includes projected savings from an earlier law requiring the use of ethanol in gasoline that takes effect this year.

Even so, Curtis said, "overall, this does represent a bold step for Hawai'i to reduce its oil use."


Much attention at this year's legislative session likely will focus on Lingle's proposals to repeal the wholesale gasoline price cap or to invest in cutting-edge hydrogen fuel research, but neither of those proposals account for any of the savings included in the governor's energy plan.

What would generate new savings is a proposal to divert the more than $19 million a year Hawaiian Electric Co. now collects from 425,000 customers statewide that is supposed to be used for conservation and renewable-energy programs, including the subsidies offered to homeowners who install solar water-heating systems.

The administration wants to put the money into a fund for the same purpose, claiming HECO isn't spending enough on those programs.

HECO, which runs the electric utilities on O'ahu, Maui and the Big Island, has raised objections to Lingle's energy plan. Company spokesman Chuck Freedman said if Lingle and the Legislature divert the money, HECO may have to ask the state Public Utilities Commission for a rate increase to recoup the loss.

"It seems to us that there's a real risk of the customers having to pay twice," he said.

Electricity consumers in Hawai'i already pay the highest rates in the nation. HECO received an interim 3.3 percent rate increase for its O'ahu customers in September, and has a request pending for an additional increase.

The company also filed a notice that it plans to seek a rate increase this year for its Big Island subsidiary, Hawai'i Electric Light Co.

The disagreement over that key provision of the bill raises the possibility of a confrontation between Lingle and the utility at the state Capitol, where HECO has a formidable lobbying presence.

When the PUC allowed HECO to begin imposing the charge more than a decade ago, it allowed the company to keep some of the money to compensate for lost electricity sales resulting from conservation programs.

The Lingle administration said HECO documents show the utility spent only about $7.6 million of the $19.2 million it collected in 2004 on conservation programs, with the rest of the money going for "shareholder incentives" and to compensate the utility for lost sales.


The Lingle energy bill would create the Hawai'i Public Benefits Fund to use almost all of the money HECO collects from the charge to encourage conservation and alternative energy.

Ted Liu, director of the state Department of Business, Economic Development and Tourism, said 18 other states have a similar fund.

Severin Borenstein, director of the University of California Energy Institute, said when demand for electricity is growing, as it is in Hawai'i, there is no reason to pay a utility for lost sales from conservation. The idea behind paying power companies for lost sales makes sense only when power-generating facilities are underused because of conservation programs, he said.

"In a growing system, it is very hard for them to claim they have some capacity built that won't be used" because of conservation programs or a shift to alternative energy, Borenstein said.

Liu said Lingle's energy plan does not target HECO, although there are provisions certain to displease the company.


Another example is a proposal to modify the "fuel price adjustment clause" that allows HECO to automatically pass on to consumers any increase in the cost of the fossil fuels the company burns to produce power.

The bill would direct the PUC to modify or eliminate the clause, exposing HECO to some element of risk when oil prices rise, Liu said.

The current arrangement, in which HECO can simply pass along price increases, provides the company with little incentive to shift to renewables, such as wind or solar power, Liu said.

Freedman said 35 other states have a mechanism similar to the fuel-price adjustment. He said HECO makes no money from the arrangement.

The company has aggressively pursued wind power projects on Maui, O'ahu and the Big Island, Freedman said, and has more plans in the works.

"The notion that somehow we've slowed down on renewable energy because of the oil adjustment clause is just a false notion," he said.

Reach Kevin Dayton at kdayton@honoluluadvertiser.com.