The Public Utilities Commission has ruled on the matter of who should pay the costs incurred by Hawaiian Electric utilities when they service loans made from the Green Energy Market Securitization fund, or GEMS.
Hint: It’s not the utilities.
Another hint: It’s not the GEMS loan recipients.
Answer: Once again, it’s Hawaiian Electric ratepayers.
Yes, the same people who are paying off the $150 million GEMS bonds are now being socked with the additional costs associated with a yet-to-be-approved method of on-bill repayment, called GEM$, that will allow people who receive GEMS- backed loans for photo-voltaic and other energy-saving technologies to pay off their debt through financing charges on their monthly electric bills.
In the “request for guidance on the on-bill repayment mechanism” that Hawaiian Electric filed on November 24, it argued the inequity of this approach: “the companies are wary of recovering such implementation costs and ongoing costs via their broader customer base for a program that will only be utilized by customers participating in HGIA’s GEM$ program.”
In an order approved by the commission on January 5, the PUC sided with the HGIA, determining that the Hawaiian Electric utilities “shall not recover costs associated with the GEM$ program directly from” the Hawai‘i Green Infrastructure Authority (HGIA), which administers GEMS. “Instead, the PUC ruled, “the companies may seek to recover these costs as part of their revenue requirement, in a rate case.”
The ruling came after negotiations between HGIA and Hawaiian Electric over implementation of the GEM$ program broke down last fall. As Environment Hawai‘i reported in January, the matter of who should pay costs associated with on-bill repayment was just one of several areas of dispute.
Hawaiian Electric asked for clarification on disconnection, in the event that GEMS loan recipients don’t pay their bills in full. The PUC instructed the companies to “follow their standard disconnection process.”
On the matter of how payments should be allocated in the event that a ratepayer does not remit full payment for electric consumption and the GEM$ charge, the PUC stated that the GEMS loan repayments “shall have senior status over payment for electricity usage.”
Hawaiian Electric had raised the issue of indemnification from harm that might arise from actions of Concord Servicing, the company that has contracted with HGIA to manage the GEMS loans. “The commission will not insert itself into any putative negotiations between the companies and Concord,” the PUC ruled, “and the absence of a coordinating agreement between the companies and Concord shall not delay the implementation of the GEM$ program.”
Hits on Ratepayers
In effect, the PUC decision on GEM$ charges — that they be borne by ratepayers — marks at least the fourth time that Hawaiian Electric’s customers have been burdened with charges related to the GEMS program.
The first, and so far greatest, charge is the monthly Green Infrastructure Fee that appears on Hawaiian Electric utility bills. This goes to repay the principal and interest on the bonds that were sold in 2014 to underwrite the program. It also diverts money away from the beneficiary of the Public Benefits Fee, which underwrites Hawai‘i Energy. (Hawai‘i Energy is the private contractor that provides discounts for energy-efficient appliances and gives residents and businesses audits of their energy uses, among other things. It has a solid history of achievement in spurring reduced consumer demand.)
A second hit to ratepayers came when the 2017 Legislature diverted $46.4 million in GEMS funds — over one-third of the available balance — to the Department of Education. This is an interest-free loan, which means that the proportion of the interest payments on the GEMS bonds that would otherwise be paid by GEMS loan recipients will fall instead to ratepayers who are not directly benefiting.
The third hit is this: To restore funds diverted from the Public Benefits Fee, the PUC directed that amounts the HGIA receives as loan repayments have to first be applied to replenishing this fund. Only after that can HGIA use funds for its own administrative costs. This has been taken by the HGIA to mean it has to set aside at least another $20 million in GEMS funds for its own use. Or, as the agency states in its 2017 report to the Legislature, “As HGIA is not supported by general funds, and as loan administration and servicing will continue for 20+ years, this [PUC] order requires HGIA to set aside and reserve a portion of the loan funds to ensure proper administration and servicing until the loans are paid in full.”
A Way Out?
GEMS money is not part of the state’s general fund nor were the GEMS bonds secured by the full faith and credit of the state. Instead, the bonds are secured by what’s called a non-bypassable fee charged to Hawaiian Electric ratepayers.
The fact that the HGIA has been slow (to be charitable) in approving GEMS loans has led some to call for raiding the fund. But this is not possible. As the bonds are secured by ratepayers, and not taxpayers, GEMS funds are not subject to distribution by the Legislature for purposes other than those set forth in the law establishing the program, passed in 2013.
The HGIA itself seems to acknowledge that it needs help in moving funds from the bank into the hands of parties who can make use of it. In its 2017 report to the Legislature, it offers a suggestion:
“By converting a portion of the GEMS fund into a revolving credit facility for any state agency to access low-cost financing to install energy efficiency measures would provide significant impacts towards the achievement of the state’s Energy Efficiency Portfolio Standard (EEPS) goals as well as substantial, ongoing benefits toward the reduction in energy costs for both the state and Hawai‘i’s taxpayers.”
The proposal is itself implicit recognition of GEMS’ failure to deliver on its initial promises. Instead of helping renters, low-income families, and other economically disadvantaged residents of Hawai‘i enjoy the benefits of energy-saving technology, HGIA is now recommending the funds be nothing more than a cheap in-house bank for the state.
— Patricia Tummons
Leave a Reply