PUC Puts the Brakes on PV Project In Ka`u, Biofuel Plant in Pepe`ekeo

posted in: October 2016 | 0

The state Public Utilities Commission (PUC) has issued orders that resolve – at least for now – two of the longest-festering matters before it.

The first of these involves a series of Feed-In Tariff (FIT) projects, totaling more than 6 megawatts, proposed for the rural Hawaiian Ocean View Ranchos subdivision in the Big Island district of Ka`u. The Big Island utility, HELCO, needed PUC approval before it could build the substation and overhead lines required to add the new output to its circuits.

The second involves the stalled-out Hu Honua power plant being built on the same site as the old Pepe`ekeo sugar mill on the Hamakua coast, a few miles north of Hilo. Faced with repeated delays and missed milestones, HELCO informed the plant’s owners that it was canceling the power-purchase agreement calling for Hu Honua to produce around 21 megawatts of electricity to be added to the island’s grid.

The FIT Projects

For several years now, residents of the remote Hawaiian Ocean View Ranchos (HOVR) community have chafed at the behavior of an entrepreneur, Pat Shudak, who sought to exploit the FIT rules by buying up practically every available lot offered for sale in the subdivision. Tier 1 of the FIT program was intended to benefit small generators by allowing them to sell energy at premium rates to Hawaiian Electric utilities across the state, with a capacity limit of 250 kilowatts per installation. Shudak bought more than two dozen lots in HOVR and an adjoining unimproved subdivision, consisting of forested `a`a lava. He received approvals for FIT photovoltaic installations with a total capacity of 6.5 megawatts. (One additional 250 kilowatt project had already received approval to enter the FIT queue, making for a total of 6.75 MW of total added capacity.)

In August 2015, HELCO applied to the PUC for approval to build a 69 kV overhead transmission line through the community to serve the FIT projects and a new substation.

Growing community dissatisfaction with the developer resulted in hundreds of public-comment letters being sent to the PUC. This culminated in the submittal, on August 29, of a 72-page-long formal complaint by residents Ann and Peter Bosted, which has been logged in as PUC docket 2016-0224.

On September 9, the PUC suspended further action on the HELCO request for approval of the overhead line required to serve the FIT projects, pending resolution of the Bosteds’ complaint.

“The commission observes that the proposed Ocean View substation and related line extension … would not be necessary but for the underlying FIT projects,” it wrote in its order. “The Consumer Advocate has raised numerous concerns related to the underlying FIT projects, including that the projects were shepherded through the FIT process in a manner that may have circumvented the Competitive Bidding Framework. Furthermore, the Bosteds have filed the complaint, which pertains to the underlying FIT projects, raising many of the same issues that were identified by the Consumer Advocate. If the commission were to grant the relief sought in the complaint, namely that the commission issue an order removing the FIT projects from the FIT’s active queue, it could materially affect the commission’s evaluation of the instant proceeding.”

Hu Honua

Pepe`ekeo power plant. Credit: Keep Our Island Clean
Pepe`ekeo power plant.
Credit: Keep Our Island Clean

In February, HELCO informed the PUC that it would be terminating its power-purchase agreement for the Pepe`ekeo Hu Honua plant on March 1, owing to Hu Honua’s failure to meet several significant construction milestones.

On February 23, Hu Honua informed the commission that “the only current barrier to completion of the project was HELCO’s unwillingness to negotiate milestone extension dates.”

After the notice of termination, on May 19, Hu Honua appealed to the commission, asking it to investigate HELCO’s “attempts to terminate the PPA,” “issue information requests as a part of that investigation,” and “clarify what actions and/or decisions the commission” intends to make.

The commission followed up with information requests to both Hu Honua and HELCO. On September 8, it issued its order in the matter, finding that “a dispute between Hu Honua and HELCO clearly exists.” However, the power-purchase agreement itself “sets forth a process for resolving disputes … including provisions for mediation and arbitration.”

Hu Honua had also asked the commission “to review whether it is in the ratepayer’s interest for HELCO to execute a price reduction and milestone amendment to Hu Honua’s commission-approved PPA.” However, the PUC order continued, “Hu Honua is not a party to this docket. No party to this docket has proposed an amendment to the PPA, and the commission action that Hu Honua requests would contravene the express terms set forth in the PPA.” For that reason, “it is not appropriate for the commission to intercede in this matter. Hu Honua’s request is, therefore, dismissed with prejudice.”

That does not mean that the Hu Honua plant will not be completed and eventually made a part of the HELCO grid. “HELCO has stated that it is ‘agreeable to continuing to work with Hu Honua’ to see if HELCO and Hu Honua ‘can mutually agree upon a proposal that will enable the [project] to move forward for commission review and approval. If HELCO and Hu Honua come to an agreement regarding proposed amendments to the PPA or any alternate proposal, the commission expects that HELCO will promptly submit any proposed amendment or proposal to the commission for review.”

— Patricia Tummons

For Further Reading

Environment Hawai`i has published several articles on these topics. See:

  • “Coming PUC Decision Could Make Ka`u Solar Projects Uneconomical,” August 2016;
  • “Creditor Owed $30 Million Presses Forward with Foreclosure Action Against Hu Honua,” December 2014;
  • “Hu Honua’s Creditors Jam Hilo Court with Applications for Mechanic’s Liens,” March 2014;
  • “Biomass-Fueled Power Plant near Hilo Continues to Face Legal Challenges,” December 2013.

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