Each week Editorial and Opinion Editor Jeanne Mariani-Belding hosts The Hot Seat, our opinion-page blog that brings in elected leaders and people in the news and lets you ask the questions during a live online chat.

On The Hot Seat last week was Ted Liu, director of the state Department of Business, Economic Development and Tourism.

Here is an excerpt from that Hot Seat session. To see the full conversation, go to The Hot Seat blog at http://hotseat.honadvblogs.com. (Names of questioners are screen names given during our online chat.)

This week's first question centers on a recently announced agreement between the state and Hawaiian Electric Co., in conjunction with the Department of Energy, to aggressively move Hawai'i off its dependence on imported foreign oil. The state estimates the deal could save us billions.

Steven Smith: Why was this type of agreement with the electric company necessary? I heard it's just a letter of understanding. What does that really accomplish? Is Hawai'i's economy doing better or worse than the national economy? Why?

Liu: Hawai'i's 90 percent imported fossil fuel dependence is the result of a regulatory and policy system devised and erected over the course of a century that assumed ever-abundant and cheap oil and based on a central power generation system with a grid that delivered electricity one-way. Our regulatory system encouraged and entrenched that assumption, which is now outdated. The transformation to a 70 percent clean energy driven economy, then, requires a new regulatory and policy system that is more renewable energy — resourced with distributed generation of that energy and a "smart" grid that enables the energy to be controlled and to flow both ways. Hawai'i needed to fundamentally transform how it sources, generates, distributes and uses energy. The HECO agreement sets the basis for that transformation.

It seeks to establish new "rules of the road" such as a system of "feed-in tariffs," which will make renewable generation and distributed generation easier to achieve. "Feed-in tariffs" is a system of published set prices that HECO is committed to pay for quantities of renewable electricity. If a renewable power producer can generate that electricity at the published price, that producer is entitled to "feed-in" — to sell — that electricity to the utility at that price. This creates certainty, predictability and eliminates the lengthy process of negotiating individual power purchase agreements.

The agreement doubles the state's Renewable Portfolio Standard law from 20 percent by 2020 to 40 percent by 2030. The parties also agree to pursue an Energy Efficiency Standard. It sets programs and targets for increased electricity from wind and solar resources. To facilitate these wind and other projects, the agreement commits to an undersea electricity cable linking Maui County to O'ahu. Besides the ability to bring renewable energy to O'ahu, the state's largest load, an interconnected statewide grid will bring greater grid stability, efficiency and security to all Islands.

To move decisively away from imported fossil fuels, the parties agree to no new fossil-fuel plants, including a ban on new coal-fired generation plants.

As to the economy, we need to be realistic and accurate in how we see the Hawai'i economy. For now, Hawai'i's economy is flat — that is the rate of growth has slowed. While we're constantly reviewing our projections, DBEDT still anticipates GDP growth, adjusted for inflation, this year and in 2009.

Tourism is, of course, down for the year, 8 percent through August, and that downward trend will likely show continued losses when the September and October data are available.

But, while Hawai'i's economy is growing slower and may end up with no growth, it is not in serious decline. Relative to the national economy, we're doing better. Our job losses in tourism-related industries resulted in a slight decline in September's total job count from the same month in 2007, down 0.1 percent. But some areas are still showing job gains, like retailing, educational and other services, and federal government jobs. Hawai'i's unemployment rate is now 4.5 percent, well below the 6.1 percent national average.

Hawai'i is probably not in a "recession" at this point, but that is certainly a real possibility if the decline continues to deepen or is prolonged.

John: We know that tourism from the Mainland has slowed down. What about tourism from other countries? Has there been a slowdown there, too, and what is the state doing about it?

Liu: Last week's announcement by President Bush regarding visa waivers for seven new countries including South Korea is good news for Hawai'i. Visa waiver status for South Korea has great potential for increased visitors and business opportunities for the state. We believe that within the first year of visa waivers for South Korea that visitor numbers will double and within the first two years, double again.

Through the first quarter of 2008 Korean visitors increased 13.2 percent compared to the same period last year

We continue to be bullish about the China market as well. The U.S. and China MOU on tourism, which allows leisure travel from China and U.S. businesses to market travel to the U.S. as another way to help diversify our geographic market mix of visitors. Chinese visitors to the Islands, through the first quarter of this year, have increased 19.8 percent compared to the same time period last year.

Later this year, Lt. Gov. (James "Duke") Aiona will travel to Korea and Japan to, among other things, promote tourism. Gov. (Linda) Lingle will visit Taiwan and China to do the same.

Meheroo Jussawalla: When you first came to Hawai'i as head of DBEDT, you promised to diversify the state's economy in order to reduce its total dependence on tourism. That would have involved a boost to the high-tech sector and innovations that employ high-tech labor. Can you tell us what steps you have taken in order to achieve this goal other than the tax benefits to investors, which seem to have gone awry? Do you have plans to improve the employment levels through high-tech investments?

Liu: I think the data speaks for itself. According to the latest studies by the Hawai'i Science and Technology Council, Hawai'i has had good job growth in the technology sector. The Milken Institute ranking has shown dramatic improvement in Hawai'i's ranking in science and technology. I fully agree with your point on tax benefits. Tax credits need to be but one tool of a broad toolbox we have to support the diversification of the economy. That is why we have focused on workforce development, STEM education, R&D and commercialization.

Lisa: I'm interested to know how the new energy plan will benefit "us" users? Will we be required to pay higher rates? Who's going to be ultimately footing the bill?

Liu: One of the fundamental reasons we are implementing this energy program is consumer benefits, including stable and lower energy costs.

We recognize that moving to a clean, renewable energy future requires this significant up-front investment with an ultimate impact on Hawai'i's ratepayers and taxpayers. Every attempt will be made to maximize private sector and federal funding.

However, we expect these costs to be offset by savings to the ratepayers and taxpayers from energy efficiency and conservation gains and integration of cheaper electricity from renewable energy.

The total economic and environmental benefits, including savings from not having to pay for foreign oil, will substantially outweigh the transitional costs. Each and every year we export $5 billion to buy the foreign oil. If we kept a portion of that in our economy, it means more jobs. That is also a benefit to the consumers.

Steve: Are there any cost estimates for the undersea cables from Maui County to O'ahu? If so, what are they? Also, are there any negotiations under way to develop a wind farm on Moloka'i? If so, with whom?

Liu: Several alternatives are being studied and considered. It is important to note that all of these alternatives are being offered up by private sector developers of undersea cables. These developers have laid and built undersea electric cables in places very comparable to Hawai'i.

In terms of cost, current best estimate places the cost at approximately $700 million to $800 million (this is for the indicative option set out above two connecting cables between Moloka'i and O'ahu, one cable between Moloka'i and Maui, and two cables between Moloka'i and Lana'i). Changes to these parameters will change the costs.

With regard to any wind developer on Moloka'i, there is a lot of interest, but the state is not negotiating with any party.

Lan: What's the plan with the Hawai'i Tourism Authority now that the director is gone? What is the governor doing to fix it?

Liu: The HTA and its marketing contractors have never taken its eye off the ball.

The Hawai'i Tourism Authority, to date, has allocated an additional $4.5 million for marketing to increase demand for a Hawai'i vacation from the U.S. Mainland.

The strategic marketing campaign is a partnership campaign between the Hawai'i Visitors and Convention Bureau, hotels and travel sellers valued at over $12 million. The campaign launched earlier this month and targets the top U.S. geographic markets that have the potential for growth in outbound visitors.

The campaign, "Discover More of Hawaii for Less Than You Imagined," offers value-added travel packages with considerable savings. The special deals are good now — with some offers available through the first quarter of 2009.

The HTA Administration Committee has met to discuss the search for a new president. An investigative search committee is being formed to facilitate the process.

Reach Jeanne Mariani-Belding at jmbelding@honoluluadvertiser.com.