KIUC moves to increase its debt limit

LIHU‘E — Consumers are changing the way they utilize energy, said Brad Parsons of Kauaians for a Bright Future.

This is exactly why he agreed with Kaua‘i Island Utility Cooperative first-year Board of Directors member Ben Sullivan’s decision to vote against the co-op’s 10-Year Financial Forecast at the board’s meeting Jan. 26. The forecast was approved by a 6-to-1 vote.

The load growth forecast was part of the required application process for KIUC to qualify for a $168 million loan that follows a four-year construction plan, KIUC President and CEO Randy Hee said Sunday. The Construction Work Plan includes transmission line work, renewable energy projects and a Kapaia facility which would have the ability to generate energy from petroleum or biodiesel fuels.

“It is far more than paperwork but is procedural in nature,” KIUC spokesperson Anne Barnes said regarding the forecast. “It does not constitute a commitment. It does allow for the necessary opportunity for access to capital, something that is critical to a utility.”

The additional loan amount would bump KIUC’s debt limit up from $350 million to $525 million.

Predicting continued load growth “assumes the trends of the old economy from two years ago and beyond,” Parsons said.

“The long-range forecast relies more on historical trends,” Barnes said. “The short term relies more on current trends.”

Two years of “considerable input from staff” and the knowledge of consultants from Black & Veatch, R.W. Beck, Stillwater Inc. and Energy Resource Planning led to the current decade-long forecast, or Equity Management Plan. Collectively, they studied the Integrated Resource Planning for capital projections, fuel forecasts, load forecasts, construction works in progress and long-range engineering plans, Barnes said.

“The incorporation of these studies became the financial forecast,” she said. Lower sales throughout the next four years were reflected “due to the recent bad economy.”

Parsons and others continue to point at how people are historically changing their ways. They are using their cars differently, development is not “continuing like it did in the past,” and visitor numbers are declining, he said.

Last week Reuters reported that industrialized, wealthy countries “will never return to 2006 and 2007 levels” of oil use “because of more fuel efficiency and the use of alternatives,” according to the International Energy Agency’s chief economist.

“What we’ve seen over the years is Kaua‘i is growing,” Hee said when asked on what basis the forecast was measured, adding that the co-op “did account for a little dip to some extent.”

“Our history on Kaua‘i has been fairly constant growth,” he said.

The projection assumes pretty aggressive growth, Sullivan said during the  board meeting. The question is what will happen if the growth does not actually occur as planned?

The impact of efficiency is not entirely being accounted for, he said.

“KIUC recognizes there is considerable risk in predicting the timing, extent and duration of economic recovery,” Barnes said. “But planning horizons in the utility industries can be as long as 10 years for capital improvements, renewable or otherwise. Hence, the necessity of long-range planning and access to capital.”

If plans follow through to build a proposed 10-megawatt solar thermal farm, as well as a 20-megawatt biomass-to-electricity plant on the Westside, “a substantial amount of power for the island” could potentially be supplied within the next decade, Barnes said. However, “due to capacity factors and other issues, determining actual output is not necessarily a simple mathematical calculation.”

KIUC’s loan application was submitted soon after the Jan. 26 board meeting and could take up to a year to be approved, Hee said.

• Coco Zickos, business and environmental writer, can be reached at 245-3681 (ext. 251) or czickos@kauaipubco.com.