Counties, Economic Development Boards May Receive Bulk of Energy Security Funds

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“We’re plunking millions into these programs. Do we really know where we are?” asked Sharon Moriwaki, co-chair of the University of Hawai`i’s Energy Policy Forum and moderator of last month’s Asia Pacific Clean Energy Summit panel on measuring and reporting sustainability achievements.

Indeed, big numbers were thrown around in talks at the summit. In Governor Neil Abercrombie’s keynote speech alone: a $300,000 Department of Energy grant for electric vehicles on Maui; $6.1 million to the University of Hawai`i to research photovoltaic inverters; and a $750,000 grant from the state Department of Business, Economic Development, and Tourism (DBEDT) to the Public Utilities Commission.

Establishing performance indicators to assess whether those expenditures are meeting the state’s energy goals is “really critical as we go forward,” Moriwaki said.

Hawai`i’s environmental response, energy and food security tax — more commonly known as the barrel tax – has generated more than $10 million over the last year, deposited into special funds aimed at helping make the state more self-sufficient. But relatively little of that has been spent.

In 2010, the state Legislature passed a bill raising the tax on each barrel or part of a barrel of petroleum product (excluding aviation fuel) from $0.05 to $1.05. Most of the money, $0.60, goes into the general fund. The rest is split four ways, among the state Department of Health’s emergency response revolving fund, the Department of Business, DBEDT’s energy security special fund, the energy systems special fund, and the Department of Agriculture’s (DOA) agricultural development and food security fund.

By July of this year, the energy security special fund and the agricultural development and food security fund had each received about $3.9 million as a result of the tax hike. The energy systems special fund, which is supposed to fund research by the University of Hawai`i Hawai`i Natural Energy Institute (HNEI), received about $2.4 million.

Before the next legislative session, the Hawai`i Economic Development Task Force (HEDTF) must prepare recommendations on whether the apportionment of the barrel tax is appropriate.

So how have the funds regarding food and energy security been spent so far?

According to DOA director Russell Kokubun, the state Department of Budget and Finance prohibited his department from spending its barrel tax money before July.

“They needed one full year of collecting the money before allowing expenditures,” he says.

Regarding its current spending plans, he says, “We were given some marching orders in the budget.” Half a million dollars will go to UH’s College of Tropical Agriculture and Human Resources to support research and $400,000 will fund the efforts of the DOA’s Agricultural Resources Management Division to support irrigation systems, including $75,000 to an east Kaua`i cooperative that leases state lands.

How or whether any barrel tax funds will be used to help preserve the state’s 140 or so state-regulated reservoirs has not been decided, he says. Reservoirs throughout the state are in danger of disappearing if owners are forced to bear expensive upgrade and maintenance costs associated with new regulations approved by the Board of Land and Natural Resources, but as yet unsigned by the governor.

Priorities listed in a DOA report to the 2011 Legislature include funding positions for entomologists and plant quarantine commodities inspectors, hiring food and energy security planners, and continuing the development of a database to track Invicta (the red imported fire ant).

Total 2012-2015 estimated cost for the more than 50 potential ag-related projects listed in the HEDTF 2011 report to the Legislature: $43,816,230.

Unlike the DOA, the DBEDT has not waited to spend its funds, although it has only spent a fraction of what has accumulated.

The energy security special fund gets about $3.5 million to $3.8 million a year from the barrel tax, says James Bac of the state energy office. 

In fiscal year 2011, DBEDT spent some of the money on travel for the HEDTF (which meets in Honolulu), gave some to the counties, and used some to support planning for an inter-island cable and for the development of an online permitting project, he says, adding that about $167,000 was taken out by two legislative special assessments levied on all special funds.

According to Bac, DBEDT ceased spending barrel tax funds after former office administrator Ted Peck left in January and was replaced by Estrella Seese. 

Seese, Bac says, wanted to have a better understanding of what projects were being targeted. For fiscal year 2011, DBEDT spent about $860,000 of $3.5 million, which is the current spending ceiling for the fund. DBEDT is seeking to increase that ceiling for FY 2012, Bac says.

With regard to DBEDT’s current expenditure plans, Bac says the department has tried to be conscious of the kinds of projects the task force has shown interest in.

“The Legislature says grants can be provided to economic development boards and counties. We’re trying to do grants for both so they can pursue projects in their own counties. And they have to report to us,” he says. 

Memoranda of Understanding between DBEDT and the county economic development boards were completed last month. 

“We’ve got a preliminary spending plan. … We’re trying to make sure we’re on board with the director’s approval, legislative desires, and the Hawai`i Clean Energy Initiative,” Bac says.

Seese did not respond to Environment Hawai`i’s request for more information on DBEDT’s expenditures and the MOUs by press time. She did, however, mention that some funds would be used for DBEDT positions that had been supported by American Recovery and Reinvestment Act funds until the end of April. Seese adds that among the eligible funding recipients, the EDBs and the counties are “the two big ones.”

Over the past year, county officials have presented the HEDTF with their plans to become more food and energy self-sufficient with the hope that they could receive some of the barrel tax money. Although DBEDT and the DOA have already drafted and prioritized their own lists of projects they want funded, it appears DBEDT, at least, is responding to the counties’ pleas.

Hawai`i County, in particular, has been especially aggressive in developing clean energy, developing a wind farm in Lalamilo to supply the electricity needed to run its municipal water system and installing photovoltaic systems on its police and fire stations. The latter, according to Mayor Billy Kenoi, has already saved the county $1.1 million.

With regard to clean energy research, the HNEI has been unable to spend any of its barrel tax funds because of a problem in the way the legislative budget was drafted. 

To help evaluate whether these funds and others are helping the state achieve its clean energy goals, the Hawai`i Energy Policy Forum is developing its own metrics and status reports that will be independent of those from agencies such as the state Public Utilities and DBEDT, according to Carl Freedman, the forum’s regulatory reform committee chair.

“All have measurements of a lot of different things. We’re more of an objective type of approach,” he said, adding that the forum seeks to go beyond the kind of ‘bottom-up list of accomplishments” like those presented at the confeence.

The forum has largely finalized its evaluation criteria, but has not yet begun any data collection or calculations, he said.

* * *

Group Meets to Resolve Impasse over Renewables

The state Public Utilities Commission’s reliability standards working group, created to help resolve the impasse between the Hawaiian Electric Companies and the renewable energy producers seeking to use their grids, has finally begun meeting.

At last month’s clean energy summit, PUC director Mina Morita repor
ted that the group, which now includes more than 50 parties, has met twice. Most of their representatives are lawyers, with a few engineers sprinkled into the mix, she said.

“It’s worse than herding cats,” she said.

The group, which grew out of the PUC’s docket on feed-in tariffs, has been tasked with developing standards that will allow for greater penetration of renewable power into grids controlled by the HECO companies.

“I cannot tell you how critical the work of this group will be moving forward,” Morita said.

Engineering and cost issues, PUC funding and resource limitations, and uncertainties regarding long-term leadership and commitment are all potential barriers to developing more clean energy, she said, adding that “solutions are not obvious, not easy, and may not be cheap,” she said. And in the end, the rate payer will foot the bill.

Whatever standards the commission ultimately adopts, it will not compromise reliability or increase cost excessively for the sake of more renewable penetration, she said.

Teresa Dawson

Volume 22, Number 4 — October 2011

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