LIHU‘E — Despite being handed “the largest fuel rate increase from Chevron in many years,” Kaua‘i Island Utility Cooperative (KIUC) officials are hopeful that better efficiency and the use of alternative-energy resources may help offset future hikes in electric bills.
LIHU‘E — Despite being handed “the largest fuel rate increase from Chevron in many years,” Kaua‘i Island Utility Cooperative (KIUC) officials are hopeful that better efficiency and the use of alternative-energy resources may help offset future hikes in electric bills.
The average power bill for KIUC members will likely increase $5 this month after Chevron officials handed KIUC leaders a bill for fuel that showed an 11 percent increase this month compared to February.
“Chevron’s 11 percent increase from last month to this month will cost our members an additional one cent per kilowatt-hour (kWh),” said Faye Akasaki, vice president of KIUC member services. “For an average household, that’s about $5 added to their March bill.”
Albert Chee, a spokesperson for Chevron/Texaco Hawaii, said earlier this week that a combination of the international tightening of supplies announced by leaders of the Organization of Petroleum Exporting Countries (OPEC), and problems at a West Coast refinery, led to shortages that affected both the price KIUC pays for fuel, and the cost Kauaians pay for gasoline at the pumps.
“Chevron has a long-term, negotiated, fuel-supply contract with the utility there (KIUC), and that contract does include provisions for adjustment based on fluctuations of the base index,” said Chee.
“That base index is tied to the West Coast Mainland. And as you may know, petroleum prices on the West Coast have risen sharply, partly due to the previous announcements by OPEC, which would ultimately tighten the world crude supply, which caused the crude-oil prices to rise,” he continued.
“And most recently, there have been some refinery problems on the West Coast which has affected that supply-demand balance, and that has also caused the price to rise recently,” Chee said.
“So the combination of those two things and the overall increase is reflected in the (KIUC) contract and is adjusted, and that’s the reason why the fuel price for Kauai Electric (KIUC) has gone up,” said Chee.
While the amount of money that members pay on their monthly bill often fluctuates depending on fuel costs, Akasaki and KIUC President and Chief Executive Officer Alton Miyamoto are addressing ways to keep prices down.
According to the KIUC officials, better efficiency and the use of renewable energy resources will help.
“KIUC remains committed to a long-term goal of less dependence on fossil fuels, to protect our members from these unpredictable fuel prices,” said Miyamoto.
The co-op burns about 2.5-million gallons of fuel per month.
“We are continually modernizing our equipment and practices to make us more efficient,” Miyamoto continued. “As an example, an average residential household prior to Kapaia Power Station coming on line required KIUC to consume 37.7 gallons of fuel oil per month. Today, that same member household requires a little under 34.5 gallons.
“And of course, feasibility studies in renewable sources of energy are ongoing.”
Miyamoto and Akasaki discussed the recent Chevron fuel increase among other topics on Wednesday at an informational briefing at the KIUC office.
According to Miyamoto, fuel represents 38 percent of KIUC operating costs, and unpredictable prices for fuel have been a key factor in the utility’s efforts to identify alternative power sources.
“The firm is conducting feasibility studies into renewable-energy resources,” said Miyamoto. “We are looking into the best projects to do that would be acceptable for our members.”
Miyamoto said that the co-op is in the process of hiring a consultant to do a renewable-resource analysis. He added that a preliminary report could be done by the end of the summer, with a new project possibly starting in 2005.
He said that, based on his experiences, renewable-energy resources such as wind and biomass would be top alternatives to oil.
In addition to renewable resources, Miyamoto also discussed other co-op matters.
KIUC’s economic-development initiative
Because it is a RUS borrower and a co-op, KIUC has access to U.S. Department of Agriculture federal loans and grants which could soon help economic development on Kaua‘i, he explained.
In the near future, KIUC could help stimulate economic growth via a Rural Economic Development Loan and Grant program for specific projects on Kaua‘i.
According to KIUC officials, the projects would have to meet specific criteria, such as creating more jobs locally. These loans are for a 10-year term at 0-percent interest.
KIUC has engaged the help of leaders of the Iowa Area Development Group, economic-development consultants who serve more than 80 consumer-owned utilities in Iowa.
An initial community assessment was conducted in February, and KIUC will be announcing a community-wide informational meeting in the next few months.
KIUC’s rate relief
In an effort to bring rate relief to its members, the KIUC board has authorized a patronage capital refund.
The refund would be based on percentages of margins credited to members of KIUC based on their purchases of electricity. The board then, with the permission of leaders of their lender, the USDA’s Rural Utilities Service, would give back 25 percent of the previous year’s margins (profits) in the form of a patronage-capital refunds (rebates) to members.
According to a KIUC official, the patronage-capital refund is rate relief based on the prior year’s margin.
The 2003 net-margin profit has not been finalized because the KIUC yearly audit is ongoing.
Miyamoto added that when KIUC achieves 27 percent equity, the board does not need the permission of RUS leaders in order to issue patronage-capital refunds.
“Based on our forecasted economic plan, our target in order to get an equity level of 27 percent is about 10 years,” said Miyamoto. “Once we hit that level, it becomes a local board decision,” he said of the refunds.
Currently, KIUC’s equity level is approximately 3 percent.
KIUC’s 2003 statistics
Total revenues were $91.4 million, expenses were $82.4 million, and net income totaled $9 million, for the 11-month period ending Nov. 30, 2003.
Power-generation expenses totaled $36.7 million (or 40 percent of revenue). Fuel costs continue to be the major cost component of power generation, Miyamoto said.
Operation and maintenance of electric transmission and distribution line expenses totaled $2.7 million (or 3 percent of revenue).
