Unhappy with the performance of the Green Energy Market Securitization program (GEMS), which has largely failed to meet its mandate to help make solar photovoltaic systems affordable to underserved communities, the Public Utilities Commission issued an order on October 26 requiring GEMS loan repayments to be applied toward the replenishment of the Public Benefits Fee (PBF) instead of being returned to the GEMS fund.
Principal, interest, and fees associated with the $150 million GEMS bond float have been paid with an assessment on customer bills that comes at the expense of the PBF. The PBF, which funds Hawai`i Energy projects, was praised by the PUC in its October order, which noted that the Hawai`i Energy Program has, to date, saved customers “over $1 billion in energy bill savings,” with “every dollar of investment generating nine dollars in benefits.”
The PUC noted that with loans of just over $5 million issued by last July 1, the GEMS program revenues totaled less than $1 million, while administrative costs have been $2.8 million. “Meanwhile,” the PUC continued, “Hawai`i Energy has a continued track record of success.”
“Residential ratepayers in Hawai`i pay $1.18 per month … for the GIF [Green Infrastructure Fee], which serves as the guaranteed source of money to repay the bondholders who initially funded GEMS. When the commission established the GIF, it reduced the PBF by an equal amount, so that ratepayers would not pay a higher bill as a result of the GEMS program. The commission did this with the expectation of quick repayment … predicated on HGIA’s [Hawai`i Green Infrastructure Authority] projection that it would loan the entire $150 million of GEMS funds within two years and begin earning interest on that money,” the PUC stated.
“If HGIA doesn’t lend money, problems arise. Loans not issued cannot be repaid, and without loan repayment, there is no interest. If there is no interest, there is no money to replenish the PBF, no money to cover HGIA’s administrative expenses, and no money to sustains the GEMS program. … In sum, if HGIA does not collect loan repayments, with interest, it cannot fulfill its obligation to repay the PBF offset, which ultimately puts ratepayers at risk of being forced to cover the reduction in energy efficiency program funding.”
HGIA was established with the expectation that it would make loans “expeditiously,” but, the order continues, so far, HGIA has only loaned approximately 3 percent of GEMS funds. The practice whereby HGIA “pays its own administrative expenses before it returns money to the PBF jeopardizes energy efficiency programs,” it added.
In its original order approving the GEMS program, the commission allowed HGIA to use loan proceeds to pay for administrative and financing costs before repaying funds taken from the Public Benefits Fee. But the commission in its October order found that the HGIA has not demonstrated the ability to replenish the PBF, and has, thereby, hindered Hawai`i Energy’s work and caused electric ratepayers to suffer.
“The commission has a fiduciary duty to safeguard ratepayer funds, and to ensure that they are expended prudently,” the order stated.
The PUC concluded that based on its findings, it “must act now to ensure that PBF funds are replenished.”
In explaining how this is to be done, the PUC ordered the HGIA to transfer loan repayments annually as a credit to the PBF, “so as to replenish any reduction in collections of the Public Benefits Fee in that same year and any remaining underpayments from previous years that result from the offsetting of GIF collections.
Last month, we reported that HGIA was seeking PUC approval to use GEMS funds to support installation of photovoltaic equipment on a low-income housing project before that project was connected to the Hawaiian Electric Grid.
On October 10, the Public Utilities Commission determined that its initial order approving the GEMS program in September 2014 “does not preclude the HGIA from committing GEMS funds” to the project, known as Kahauiki Village. 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.
— Patricia Tummons