Updated: Oct 15, 2019
by Representative Gene Ward
More than 40 elected officials have called for creating a cooperative instead of a HECO or NextEra — but we should be able to get more than just a shot across the bow to negotiate a better deal with NextEra; we should be calling for a new power-generation model and not just a new ownership model.
First and foremost, ownership models or who owns the utility doesn’t determine electricity rates; costs primarily determine that.
If our priority in Hawaii is to lower rates for consumers, publicly owned or municipal cooperative utilities have shown negligible or little cost savings to rate payers.
Take for example the existing electrical utility cooperative on Kauai. It has been operating for more than 10 years and its rates are still 60 percent higher than on Oahu, or about 55 cents per kilowatt hour, and is likely the most expensive in the nation. Whoever owns the utilities will continue to pay Hawaii’s high cost of production, so assuming that a cooperative will lower rates appears naive at this stage.
Second, forming a cooperative to purchase HECO is not going to be cheap. This fact was conveniently overlooked by legislators promoting a cooperative to buy out HECO rather than NextEra.
Even if the Legislature condemns the utility as being in the “public interest,” it still must be purchased at “fair market value,” which now stands at $4.3 billion. The state or city making such a large purchase alongside the $6 billion rail project just doesn’t seem feasible.
Third, and most important, it is the Public Utilities Commission (PUC) and not who owns the utility that is the key to the future of power generation in Hawaii. The PUC controls HECO and heretofore has taken a rather hands-off approach that has not worked to the advantage of ratepayers.
Case in point: the PUC allowed fuel and other costs to be passed through to consumers and it never gave directives or incentives for HECO to contain or reduce costs.
A change in PUC thinking could change all this. We must begin to think long-range to when centralized power grids and distribution lines will be a thing of the past. Think IBM mainframe computers versus PCs, and that’s exactly where we are at a crossroads today, except the PUC is still thinking centralized power “mainframe” rather than phasing in a decentralized “PC.”
The PUC needs to tell HECO or a NextEra they are backup electricity producers, not primary producers, and must go all out to encourage rooftop solar, wind, wave energy and biofuels, etc., or get into these businesses themselves.
In short, consumers must be enfranchised to become producers if rates in Hawaii are ever to plummet.
If this new paradigm is not eventually adopted, we will see more and more people going off the grid, as is already happening, and two of HECO’s biggest customers in the armed forces are signaling they are about to do the same.
It is better that we dismantle the mainframe power-generation model now, and before those who will be left on the grid will have to pay even more than an arm and a leg that they are paying now.
In summary, let’s forget about who owns the utility. The Legislature designs its franchise agreement and the PUC controls it.
This is the formula for lower rates, but it has to be guided by a new way of thinking, not a new type of ownership.