By TOM CALLIS
Tribune-Herald staff writer
Hawaii Electric Light Co. is reviewing offers by two of its power producers to stop tying energy costs to the price of oil.
Curtis Beck, HELCO energy services department manager, said the utility has received proposals from Puna Geothermal Venture and an unnamed energy supplier seeking to renegotiate contracts to set fixed rates.
The result could mean lower costs for customers and more predictable rates for producers.
But much of the details remain confidential due to negotiations, Beck said, including what rates are being proposed and the identity of the other energy provider HELCO is negotiating with.
“We’re not going to agree with anything being status quo,” he said, adding HELCO’s focus is on lowering costs.
Beck said energy prices had been tied to oil due to a federal law from the 1970s that required utilities to pay “avoided costs,” the amount it would have to pay to produce the power on its own, for energy purchased from other producers. That essentially tied the rates to changes in the cost of oil, HELCO’s main source of power.
The law has changed over the last few years, freeing the utility to negotiate lower prices, he said.
That resulted in PGV’s last two contracts with HELCO, covering 13 of the 38 megawatts the utility has agreed to buy, being negotiated at lower rates.
But the original contract covering 25 megawatts of power has remained unchanged since it was negotiated before the law was amended.
Currently, HELCO is spending 20 cents per kilowatt hour during peak hours and 15 cents per kilowatt hour during non-peak hours under the original contract.
The cheaper 13 megawatts are purchased at fixed rates of about 10 cents per kilowatt hour.
Paul Thomsen, policy and business development director for Ormat Technologies, PGV’s parent company, also declined to discuss specifics of the offer.
But he said the company is willing to settle for a lower price if it can establish a fixed rate.
“The assumption is that it would be no more than avoided cost today,” Thomsen said. “But it would probably provide savings to them.
“We want to reduce our risk and we are willing to give a discount to the cost of power.”
Its existing contract would end in 2027.
Thomsen said PGV made the offer a “couple months” ago.
Beck said it preceded the introduction of a resolution to the Hawaii County Council encouraging HELCO to renegotiate contracts to de-link power costs from oil.
The resolution was approved in September.
Since then, a second power producer has approached HELCO seeking a similar change.
Beck said he couldn’t identify it yet since the producer has not provided that authorization.
HELCO also has purchase power agreements with two wind farm firms, Apollo Energy Corp./Tawhiri Power LLC and enXco/Hawi Renewable Development; and hydroelectric plant Wailuku Holding Co.
Beck said the utility is “pushing to get this done as quickly as we can,” but how long the negotiations will take remains unclear.
HELCO should be done reviewing PGV’s offer in the next two weeks, and then “provide them with a counter-offer,” he said.
Thomsen said it could take months or more, and noted that PGV’s last contract with HELCO took three years to complete.
Beck said HELCO is preparing to provide the County Council with an update at its Nov. 9 meeting, though a presentation has not been scheduled.
Thomsen said PGV will hold a community meeting at 5:30 p.m. Tuesday at Pahoa High and Intermediate School to provide an update on its operations and changes to the way it reports noise on its website.
Email Tom Callis at email@example.com.