Co-op to PUC, ‘No increase sought’

Increasing the standby rate proposed by the Kaua‘i Island Utility Cooperative will force the island to remain dependent on imported oil and discourage use of large-scale commercial projects that generate electricity outside of the utility grid system, residents told the Public Utilities Commission at a hearing Tuesday.

The utility co-op currently charges a standby rate of $5 per kilowatt of electricity produced from commercial distributed generation systems, and up until the PUC hearing at the Lihu‘e Neighborhood Center, sought an increase to about $30.

The rate increase would not affect many of the more than 29,000 KIUC members — mostly homeowners and small businesses not tied into such large systems.

In addressing PUC chairman Carl Caliboso and commissioner John Cole, Randy Hee, chief executive officer and president of KIUC, stunned an audience of more than 50 persons when he announced the co-operative was not seeking the increase.

“Although KIUC’s current standby rates that were set over 20 years ago are probably low, KIUC believes that a tariff change should not be made at this time,” Hee read from a statement.

He added any change would not adequately address the relationship of the standby rate change with the overall co-operative rate structure.

He said the PUC’s investigation into effects of distributed generation projects across the state compelled the production of a KIUC study that provided the higher rate.

“Do we think the rate should be put in place at this time?” he asked. “My testimony said, ‘No.’ We are saying we would rather not see any increase at this time. We need to see the overall effect.”

Hee said KIUC members and companies that sell and install distributed generation equipment may have thought KIUC sought the increase because of “perception.”

“Because of this rate-related hearing, people assumed we are requesting it,” he said. “I don’t want to place the blame on anyone. It is just perception.”

The question of whether the request was made, or whether the PUC will act on the request, has left companies wanting to put in distributed generation projects in the lurch, audience members said.

Relying on the current rate, they might install the large equipment, but may be penalized if the PUC approves the higher rate or another rate that will not be acceptable, they said.

Walt Barnes, a founding director of KIUC and no longer on the board, strongly urged the PUC not to change the rate at this time.

He also strongly urged KIUC to seek rates that would discourage people from using distribution generation equipment that produces unacceptable gas emissions to generate electricity.

Many lessons can be learned from the KIUC request, but the “lesson to remember is never underestimate the hazardous side effects of single-line rate-making, because it is hard to know what you don’t know,” he said.

Barnes also said the current rate is bad for the community and bad for KIUC because it is “grossly out of line with the co-op’s actual cost to provide standby service,” an assessment echoed by Hee.

Thomas Gorak, a Honolulu attorney, appearing on behalf of the Kaua‘i Marriott Resort and Beach Club, said the resort is planning to install a combined heat-and-power project to help heat its swimming pool, among one of the largest privately owned pools in the state.

“The benefit will be significantly reduced if the proposed standby tariff is approved as proposed,” he read from a statement.

Because the hotel will be using propane-fuel equipment, pollution will be less, and consumption of imported oil will be cut, he said.

The hotel will see its standby rate jump to $31.25 per kilowatt if the rate increase is approved, he said.

“This is a 625 percent increase in the previous standby rate of $5,” Gorak said.

Joseph Allan, assistant director of engineering of Hospitality Properties, the majority owner of the hotel, said while the resort’s occupancy has dropped from 96 percent in 2002 to 84 percent in 2006, and electrical consumption has remained “essentially flat,” yearly electricity bills have risen from $2.3 million to $3.4 million.

“We are concerned that KIUC’s proposed standby rate will prevent the resort from implementing a cost management option that is both reasonable and environmentally responsible,” he states in the prepared statement.

Gorak said the Kaua‘i Marriott plans to file a motion to intervene in the KIUC request.

Mayor Bryan Baptiste spoke, saying granting the rate change would slow the county’s effort to become more energy self-sufficient and cut its power bills, he said.

When the county and KIUC staff discussed a 72-kilowatt photovoltaic power system planned to be installed at the Lihu‘e Civic Center, a determination was made that the project would not trigger any standby rate charges.

After KIUC filed its rate change proposal, the county revisited the rate issue and determined that “if approved as proposed, our system would not be economical,” Baptiste said.

In spite of the challenge, Baptiste said he decided to move ahead with a renewable energy project that he believes will benefit the county and the community.

Alan Lennard, a resident from O‘ahu who attended the meeting, also asked the PUC to deny the rate increase and to have KIUC justify its request.

Installation costs of large-scale solar equipment has increased in Hawai‘i because of high oil prices, he said. “This momentum would dramatically decline, despite enhanced incentives, if this rate increase were approved,” Lennard said in the statement.

Catherine Awakuni, the executive director of the division of Consumer Advocacy, urged residents to speak out on the matter.

“Your input is important because only you can tell us what effect the company’s proposal may have on you,” she wrote in a statement given to the PUC.

She said her agency will review the KIUC request and will file a position statement.

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