KIUC approves $880k for engine-related expenditures

The Kaua‘i Island Utility Cooperative board of directors at its monthly meeting Tuesday approved $880,000 over six years for membership to a General Electric engine lease program as well as anticipated 2009 lease fees. Membership, which serves as an insurance policy of sorts should any of the co-op’s major generators fail, guarantees engine availability within five days of a request and includes heavy discounts on leases once the equipment is supplied. Membership fees alone total $666,000 for six years.

“It’s like time-sharing an engine,” board member Allan Smith said.

According to KIUC Production Manager Brad Rockwell, the co-op already plans to lease an engine from GE at least once during the next six years. In the spring of 2009, a 13-week overhaul is scheduled for the Kapaia Power Station, which entails shipping the gas turbine engine off-island. Due to its generating capacity — the station is the single largest energy producer — a replacement will be required for the entire three-month time frame. Rockwell said that as a member of the GE program, the cost to lease will be $214,000. As a non-member, the cost would be $747,000.

When asked about insurance coverage already in place for KIUC’s engines, Rockwell said the policies cover damage to equipment but not losses accrued while an engine is out-of-service or failures resulting from poor maintenance.

The board also OK’d Rockwell’s request to spend $500,000 to replace another engine’s switch gears in 2008, instead of 2009 when it was scheduled to take place. The engine, which supplies 20 percent of KIUC’s generating capacity, has failed twice. Following a failure in September 2006, the unit was refurbished and brought back online. It failed again last month, which has “upped the urgency” of the replacement, Rockwell said, as there is a lead time of up to a year.

“Until we get that next generator online, we’re in a critical stage,” he said.

Habitat Plan

The board approved a Habitat Conservation Plan and application for an incidental take permit, which is the first step in rectifying the unauthorized killing of protected seabirds, which have been unintentionally harmed by power lines, facilities and unshielded lights. The plan, which has been in the works since 2002, is designed to minimize and mitigate impacts on Kaua‘i’s seabird population, while the permit authorizes the incidental “take,” or harm, of a threatened or endangered species.

Looking forward, the Department of Land and Natural Resources will determine if the documents are complete. After DLNR approval, the documents will undergo a 60-day public review.

The board also discussed whether an environmental assessment or environmental impact statement should follow. While the latter is a larger and more costly study, consultants working for KIUC on the process agreed that an EIS offers more protection against procedural lawsuits, such as those levied against Hawaii Superferry and the state. In addition, a potential outcome of an EA is that an EIS is required. To date, portions of utility lines have been lowered near Kealia.

Chevron line of credit

A $1.3 million line of credit was extended as an interim measure to Chevron, which supplies fuel to the co-op. The Public Utilities Commission has to finalize the credit reservation, which will likely take place in the next few months. Board members said Chevron “requested/demanded” the credit as a financial “security” measure.

Revolving Loan Fund

The Member Relations Committee announced it is ready to take applicants for KIUC’s Revolving Loan Fund, which offers low-interest loans of $40,000 or more to Kaua‘i nonprofits and businesses for projects that build the local economy. There is currently $360,000 in the fund.

President’s report

For the month of September, there were no reportable accidents, keeping the year-to-date total at three. However, President and CEO Randy Hee noted that there were two in October, which will push that figure up. Also in September, there were four PUC-reportable outages — for a year-to-date total of 37 — and an average of .78 outage hours per customer. Total outage events for the month, which includes those not reported to the PUC, were 27, for a year-to-date total of 206. The month’s average outage hours for all events was .82.

Fuel prices continued to rise in September, though slowly. Hee noted that November will see a “drastic” increase in fuel prices.

“Conservation is probably the best way to keep the bills down,” Hee said.

• Blake Jones, business writer/assistant editor, can be reached at 245-3681 (ext. 251) or bjones@kauaipubco.com.