Miyamoto: KIUC would save millions buying Kapaia power plant

LIHUE — Kauai Island Utility Cooperative officials and board members are negotiating to purchase the island’s newest power plant.

They say up to $160 million could be saved in “capacity charges” contractually obligated to plant operator Dominion Resources over the next 25 years from the plant in Kapaia.

An initial letter of agreement could be drawn up to begin negotiations for the sale as early as mid-summer, said Alton Miyamoto, KIUC president and chief executive officer.

Miyamoto feels KIUC personnel could operate the power plant in a more cost-effective manner than Dominion is now doing, and that the successful purchase of the plant would add to KIUC’s bottom line (equity).

“Our rates, we all recognize, are high,” and buying the unit would allow KIUC officials to get out from under the $160 million capacity payments, ranging from $5 million to over $6 million a year to Dominion; increase margins and equity; allow greater rebates to KIUC members; and ensure stable electricity rates for members, he said.

If low-interest loans financing the sale can be obtained from the federal government or a national electric cooperative association, as he feels can happen, the deal will be even better for member-owned KIUC, he added.

“There are negotiations going on. We believe we can get a good purchase price” for the efficient plant, said Miyamoto. “We believe we can operate it cheaper” than at present, he said.

“You got a chance to buy the condo you’ve been living in,” said Ron Kouchi, KIUC board member and former member of the Kauai County Council.

The board’s bottom line is that if the acquisition can’t be achieved at a price equivalent to what it now costs KIUC to buy the electricity from Dominion, the board won’t approve the deal, Kouchi added.

Not all co-op members are enamored with the negotiations. “You’re getting ripped off again,” said David Camp, appearing at the Tuesday KIUC board meeting to vent frustration about details of the negotiations being held in closed-to-the-public executive sessions.

The closed-door sessions exclude the press as well, and are off-limits also to board member Randy Hee, power plant operator for Dominion subcontractor Pur Energy.

Before the board starts spending members’ money, please let members know, Camp pleaded.

Any sale would require approval of the state Public Utilities Commission, whose members and staff might be compelled to hold a Kauai public hearing on the matter before making a decision.

Once an application is filed with the PUC, most sale details would then become public, Miyamoto said. For now, confidentiality agreements and sensitive price negotiations demand some secrecy, he added.

Still called the Kauai Power Partners unit at KIUC’s Lihue Energy Service Center along Maalo Road in Kapaia, the naphtha-burning plant generates around one-third of the island’s electricity.

During the construction phase of the power plant, Kauai Power Partners was purchased by CNG Power Company of Pittsburgh, which in turn was purchased by Dominion.

Before the KPP unit came online in September of last year, KIUC’s investor-owned predecessor, Kauai Electric and parent company Citizens Communications, had an option to buy the KPP unit for $38 million. That offer lapsed when the plant became operational, Miyamoto said.

Regardless, KE officials weren’t interested in buying the KPP unit, because they were in the process of selling Kauai Electric to KIUC, and because if KE purchased the KPP unit KE officials would have had to petition the PUC for a rate increase to pay for the purchase, Miyamoto said.

Included in the contract between KPP and KE, which was assigned to KIUC when KIUC successfully purchased KE for $215 million last fall, are provisions for negotiations to allow a willing buyer and willing seller to negotiate the plant’s sale, Miyamoto said.

Business Editor Paul C. Curtis can be reached at mailto:pcurtis@pulitzer.net or 245-3681 (ext. 224).