Editor’s note: On October 10, the Public Utilities Commission clarified that its order approving the GEMS program in September 2014 “does not preclude the HGIA from committing GEMS funds” to the Kahauiki Village project. The PUC went on to require HGIA to file within 60 days of October 10 the fully executed utility connection agreement between HGIA, Kahauiki Village Development LLC, and the special purpose entity that is the designated borrower. Environment Hawai`i regrets the oversight.
In June of 2016, the Board of Land and Natural Resources approved the request of the City and County of Honolulu and the aio Foundation to develop more than 200 units of permanent housing units on around 13 acres of state-owned land lying between Nimitz Highway and Ke‘ehi Lagoon.
Because the housing, on land designated by the county for industrial use, would be developed under an emergency proclamation made by Gov. David Ige, it would be exempt from the usual zoning and environmental disclosure requirements that would otherwise have applied to any proposed use of state-owned land.
The Land Board gave its approval and in November 2016, Ige signed an executive order setting aside the land to the City and County of Honolulu to be developed as an “affordable housing project for homeless families,” adding this was to be “under the control and management of the City and County of Honolulu.”
Now the homes — made from kits manufactured in Japan following the 2010 earthquake and purchased by Duane Kurisu in 2011 — are starting to go up. A modern-day community barn-raising was held in early October, featuring volunteers and members of the military helping to slide wall panels and windows into steel framing. Kurisu, the entrepreneur whose vision is behind what is being called Kahauiki Village, wants to see 30 families in the homes by December.
But there is a hitch. Hawaiian Electric won’t be able to provide service to the area by that time.
Riding to the rescue is the Hawai‘i Green Infrastructure Authority. In a document filed October 5 with the Public Utilities Commission, HGIA executive director Gwen Yamamoto Lau asked for PUC approval to use Green Energy Market Securitization funds (GEMS) to finance the photovoltaic panels that are one element of the village’s planned power supply. (According to Yamamoto Lau, other elements are solar thermal and energy storage.)
“The project initially planned to operate parallel back-up infrastructure utilizing sophisticated paralleling switchgear and controls,” she wrote. “[H]owever, due to high upfront costs, the back-up infrastructure was downsized and engineered to provide emergency back-up power only, ultimately requiring long-term reliance on the grid. The contractor has determined that it would be able to install solar and storage for the first thirty residential units and supporting non- residential buildings in Phase I, scheduled to open in December, to temporarily run without grid connection until service from Hawaiian Electric is available.”
But under the PUC’s rules for GEMS loans, any recipient has to be connected to the utility’s grid until such time that the loan is fully repaid. Given that, Yamamoto Lau wrote, “HGIA is respectfully requesting Commission approval to finance the solar PV infrastructure for [Kahauiki] Village, upon proper underwriting and loan approvals, during the design, development, and construction phase of the project when the project may not be grid-tied, with the understanding that the project will eventually be connected to the grid.”
According to Kurisu, who describes his role as chairman of the aio Foundation, solar panels will make the village energy independent. The link to Hawaiian Electric’s grid — whenever it finally comes — will be used only for emergencies. “We don’t expect to draw power from Hawaiian Electric,” he said in a phone interview. “We expect to be 99 percent self-sufficient.” (Natural gas, however, will be used for cooking purposes, he added.)
Kurisu said he was unaware of the PUC filing that the HGIA’s Yamamoto Lau had made. Arrangements for power for the village were being made by PhotonWorks, he said, and it would have been that company that developed financing arrangements with the HGIA.
Yamamoto Lau’s filing does not mention any dollar amount for the loan that GEMS would be providing, in the event of PUC approval. In response to a question from Environment Hawai‘i, she said the GEMS loan would be in the neighborhood of $685,000 — an amount that, she noted, that included leverage provided by Central Pacific Bank.
A draft “utility connection agreement” appended to Yamamoto Lau’s request commits both the borrower (an unnamed “special purpose entity”) and the project owner (Kahauiki Village Development, LLC) to connecting to Hawaiian Electric’s grid “at such time as the utility improvements have been completed and the connection to the grid is first available.”
Yamamoto Lau was asked why the special purpose entity would be required instead of having the agreement be directly between Kahauiki Village Development and the HGIA. “The project owner is a nonprofit and therefore unable to monetize the tax credit,” she replied.
By press time, neither the PUC nor any of the other parties in the HGIA docket had replied to Yamamoto Lau’s filing.
PUC Rejects HGIA Request
To Withdraw Oversight
As Environment Hawai‘i has reported, the Hawai‘i Green Infrastructure Authority has chafed under the requirement that its development of various categories of loans for GEMS funds – “loan products,” in the HGIA’s terms – be subject to approval of the Public Utilities Commission.
During the 2017 Legislature, a proposal to remove PUC oversight did not make it through to passage. Following that, on July 21, HGIA executive director Gwen Yamamoto Lau filed a formal request with the PUC that it voluntarily remove itself from that supervisory role.
On October 12, she got her answer — a loud and clear “no.”
“After reviewing the entire record and history of the GEMS Program, the commission is not persuaded by HGIA’s rationale for seeking elimination or suspension of the Program Notification and Program Modification processes that HGIA itself designed,” the PUC order states.
The commission noted that it “has a statutory duty to oversee the GEMS program that it cannot simply abrogate by motion or stipulation of the parties.”
The HGIA had argued that it should not be subject to the same level of PUC oversight as is given to utilities, but the commission rejected that claim: “The Legislature gave the commission such broad oversight powers because the GEMS Program relies on ratepayer funds, which the commission is obligated to safeguard. If GEMS were funded with taxpayer money, or something other than a non-bypassable surcharge on ratepayers, commission oversight would not be necessary.”
In any case, the PUC was not responsible for the numerous shortcomings or failures of the various GEMS initiatives, commissioners wrote.
“Some of these problems have been due to HGIA’s missteps, and others due to factors beyond HGIA’s control. But these problems are not clearly related to the Program Notification and Program Modification processes,” the 33-page-long PUC order stated.
Among the problems it identified:
HGIA has had four different executive directors since its launch in September 2014; GEMS “relied on deployment partners and financing products that were ill-prepared to compete in the Hawai‘i marketplace;” and, as a result, HGIA has been unable to “capitalize and deploy its funds in a meaningful way,” despite the apparently high level of interest in the GEMS program.”
— Patricia Tummons
For Further Reading
More on this may be found in our September 2017 issue: “Once More, Green Infrastructure Agency Is Attempting to Remove PUC Oversight.”