Monday, May 25, 2015

Tiny wind-solar-battery powered homes

Nice Architects, a young architectural studio based in Bratislava, Slovakia, has designed an egg-shaped and cozy micro-home that comes with solar panels, a retractable wind turbine and a battery.

The single person abode measures just 14.6 feet long by 7.4 feet wide by 8.4 feet tall and weighs 3,300 pounds. The tiny home is equipped with a tiny kitchen and dining area, a shower and flushable toilet, storage space and a foldable bed. The Ecocapsule can also collect rainwater.

The Ecocapsule has been designed to fit into a standard sized shipping container for transportation by truck, rail or ocean carrier.

Tiny houses can be used for humanitarian purposes, to house the homeless and as a cheap RV.

Sunday, May 24, 2015

The Public Utilities Commission would have regulatory authority over a Maui county-owned electric utility

By Henry Curtis

The Hawaii Public Utilities Commission regulates all public utilities as authorized by Hawaii Revised Statutes (HRS) Chapter 269.

A public utility is defined as a utility which serves the public interest in the areas of transportation of passengers or freight, telecommunications messages, transmission of electricity, gas and water, warehousing of goods and the disposal of sewage.

A public utility “includes every person who may own, control, operate, or manage as owner, lessee, trustee, receiver, or otherwise, whether under a franchise, charter, license, articles of association, or otherwise, any plant or equipment, or any part thereof, directly or indirectly for public use for the … production, conveyance, transmission, delivery, or furnishing of light, power, heat, cold, water, gas, or oil.”

There are several major exceptions. Independent Power Producers (IPPs) such as large-scale wind, solar and coal facilities which sign Power Purchase Agreements (PPAs) with a utility are not public utilities themselves. The utility must get the proposed contract approved by the Hawaii Public Utilities Commission.

In more recent times it has been suggested that some third-party entity might build an inter-island undersea cable which would allow electricity from one utility to be transmitted to another utility. Operators of such transfer systems would probably not be utilities.

A “public utility …shall not include …any user, owner, or operator of the Hawaii electric system as defined under section 269-141,” that is, any “user, owner, or operator of the Hawaii electric system” that “provides, sells, or transmits all of that electricity, except such electricity as is used in its own internal operations or is used for its own consumption, directly to a public utility for either transmission or distribution to the public.”

Another exception is when a third party owns a rooftop solar system and sells the electricity to the utility or the property owner.

A “public utility …shall not include …any person who …owns, controls, operates, or manages a renewable energy system that is located on a customer's property; and provides, sells, or transmits the power generated from that renewable energy system to an electric utility or to the customer on whose property the renewable energy system is located; provided that, for purposes of this subparagraph, a customer's property shall include all contiguous property owned or leased by the customer without regard to interruptions in contiguity caused by easements, public thoroughfares, transportation rights-of-way, and utility rights-of-way.”

The other exception is for a micro-grid where energy is generated by an entity and sold to various tenants.

A “public utility …shall not include …any person who owns, controls, operates, or manages a renewable energy system that is located on such person's property and provides, sells, or transmits the power generated from that renewable energy system to an electric utility or to lessees or tenants on the person's property where the renewable energy system is located.”

To qualify for this exception one must meet a number of requirements dealing with interconnections, use of utility distribution lines, rate formulas, effective rates, leases, non-payment mechanisms, etc.

It may appear from reading HRS 269-1 that county water boards are regulated under this chapter, since a “public utility …includes every person who may own, control, operate, or manage …directly or indirectly for public use … [the] production … [of]  water.”

  However the creation and regulation of county water boards falls under HRS 54. The boards control their systems. 

If a county does not have an existing board of water supply, there shall be a board of water supply.” (§54-12)

The board of water supply shall manage, control, and operate the waterworks of the county and all property thereof, for the purpose of supplying water to the public in the county, and shall collect, receive, expend, and account for all sums of money derived from the operation thereof.” (§54-15)

 “The board of water supply may fix and adjust rates and charges for the furnishing of water and for water service.” (§54-26)

Another issue deals with electric cooperatives whereby the “owners” and the “ratepayers” are largely one and the same. Therefore ratepayers do not have to be protected from exploitative owners.

The Governor’s legislative package in 2013 included a bill that would allow less regulatory oversight for electric cooperatives. Only Rep. McDermott voted against SB 1045 SD1 HD2 which became Act 57 and was codified in as HRS §269-31(b).

“Notwithstanding any provision of this chapter or any franchise, charter, law, decision, order, or rule to the contrary, the public utilities commission, sua sponte or upon the application of an electric cooperative, may waive or exempt an electric cooperative from any or all requirements of this chapter or any applicable franchise, charter, decision, order, rule, or other law upon a determination or demonstration that such requirement or requirements should not be applied to an electric cooperative or are otherwise unjust, unreasonable, or not in the public interest. 

Notwithstanding the above, the public utilities commission and the consumer advocate shall at all times consider the ownership structure and interests of an electric cooperative in determining the scope and need for any regulatory oversight or requirements over such electric cooperative.” 

In practice, both before and after Act 57 was passed, the Public Utilities Commission has been less involved in regulating the Kauai Island Utility Cooperative (KIUC) than in regulating HECO, MECO and HELCO.

In all likelihood the hierarchy of regulation by the Public Utilities Commission would be most intense for privately-owned/shareholder-owned utilities (HECO, MECO and HELCO), less regulation for county-owned utilities, and still less regulation for co-ops. 

That still leaves unanswered questions for regional entities which seek to take away part of or replace part of a utility, such as Parker Ranch’s Paniolo Power, the Hawai`i Island Energy Cooperative and perhaps Kulolo.

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Saturday, May 23, 2015

Will a Maui municipal electric utility lower rates?

By Henry Curtis

The County of Maui is thinking of creating a municipal electric utility. What financial impacts will that have on the average customer?

Just over a decade ago Kauai Island Utility Cooperative (KIUC) took over Kauai’s electric service from a mainland shareholder-owned utility. Over the past decade what happened to electric rates on Kauai?

People are often surprised to find that KIUC rates are higher than MECO rates for Maui Island. That may be due in part because of the mix of resources used to generate power, but it may also be in part due to the fact that many believe KIUC simply paid too much for the utility in the first place.

The process of determining rates sounds simple. First one must determine the total amount of money that the utility needs to operate and then allocate those costs to different customer classes.

It is easier to figure out costs for non-profit electric cooperatives and municipal unities. When shareholder utilities are involved there are two further complications: regulators must allow for reasonable profits and they may disapprove some expenditures, that is, force the utility not the ratepayer to cover some expenses.

Once the total amount of money is determined that the ratepayers must pay, then the costs must be allocated to different customer classes. While cross-subsidies between classes are discouraged, in reality they occur.

There may be some rate classes that are given rate breaks to encourage new renewable and energy efficiency technology or social breaks given to support economically challenged customers. There also may be inclining blocks where entering higher use costs more, and time of use rates where using energy during peak periods costs more.

Most utility costs are bundled. There is a great deal of tension between utilities and solar companies across the nation regarding how the costs and benefits of distributed rooftop solar should be allocated. The intense debate is currently raging about the true costs and benefits of net energy metered customers. Are they overpaying or underpaying their fair share of utility costs. Who is subsidizing whom?

Often the type of services do not match up exactly between different utilities. Kauai has seven schedules (classes of customers). Maui has over 20 schedules. Kauai has one basic residential class (Schedule D) while MECO has several residential rates including but not limited to  Residential Service (R), Residential Time-of-Use (TOU-R), Residential Time-of-Use Electric Vehicles (TOU-EV), Net Energy Metering and three classes of Feed-in Tariffs.

The major utility cost is for fuel. These prices change at least quarterly. Oahu has a greater reliance on cheap coal than any other island. This keeps prices lower.

Rather than comparing MECO and KIUC rates today, one could look at the actual Kauai residential bills before the changeover, during the dynamic transition period and during a stable future period. The problem is that Kauai went through a very choppy transition that Maui should take all precautions against repeating.

Another major difference between KIUC and Maui is that the KIUC transition pre-dates the Solar Revolution while a Maui Transition would occur in the middle of the Solar Revolution.

A better comparison would be looking at Maui’s current rates and estimating the transition and stable rates of the future. A future stable grid may get all of its electricity from renewable energy. But there are no 100% plans or models on what renewable mix will exist or could exist or should exist.

The 2015 State Legislature passed a requirement that Hawai`i’s Renewable Portfolio Standard (RPS) achieve 100% in 2045. The RPS is a very crude overestimation of the amount of renewable energy on the grid.

A Municipal utility differs from an electric cooperative in an important area. If large numbers of people leave the grid completely by installing solar and batteries, that is, they permanently cut their ties to the grid, then the financial integrity of the utility might be threatened. For a cooperative this would impact their members, but for a municipal this anchor would drag down county taxpayers and the county credit rating.

A hybrid approach might be to set up a Maui municipal pilot project. A county utility holding company could oversee regional micro grids involving different types of customers: the State Office complex, Maui Community College, the water utility, a shopping center, a suburban residential community and the Hana area.

This would enable the County to gain experience and could lead to a lower purchase cost for the rest of the MECO system.

This approach is similar to the Parker Ranch approach where the Ranch found if they installed their own generators and rented the utility grid they would save money. If forced to build their own parallel grid it would cost more, but they could still beat the utility price.

Installing parallel regional micro grids and threatening to extend them throughout the county may result in a utility decision to allow wheeling or to sell the system at a reasonable price.

Wheeling is a process whereby a third party injects power into the grid in one location and removes an equal amount of power from the grid in another place.  The transmission and distribution line capacity between the two points is said to be wheeled, rented or leased. The utility charges a Public Utilities Commission approved tariff for the power transfer.

The complexity of the ratepayer cost issues should not be underestimated.

On April 28, 2014 the Public Utilities Commission issued four major decisions. One of them dealt with a Proceeding to Investigate the Implementation of Reliability Standards and the recommendations of the Reliability Standards Working Group.

“The commission believes it is unrealistic to expect that the high growth in distributed solar PV capacity additions experienced in the 2010 - 2013 time period can be sustained, in the same technical, economic and policy manner in which it occurred, particularly when electric energy usage is declining, distribution circuit penetration levels are increasing, system level challenges are emerging and grid fixed costs are increasingly being shifted to non-solar PV customers.

The commission submits that the distributed solar PV industry in Hawaii will, out of necessity due to their accomplishments thus far, have to migrate to a new business model, not unlike what is expected for the HECO Companies as a result of disruptive technologies. The distributed solar business model will need to shift from a customer-value proposition predicated upon customers avoiding the grid financially - but relying upon it physically and thereby creating circuit and system technical challenges - to a new model where the customer-value proposition is predicated upon how distributed solar PV benefits both individual customers and the overall electric system.”

The Commission opened a regulatory proceeding on Distributed Energy Resources (DERS). The goal is that in the next 18 months the parties will develop the technical engineering interconnection rules and the cost accounting rate structures needed to encourage distributed rooftop systems using a fair, open and non-discriminary method.

The Parties in the proceeding are the HECO Companies, KIUC, the Consumer Advocate, Hawaii Solar Energy Association, Life of the Land, Renewable Energy Action Coalition of Hawaii, Hawaii Renewable Energy Alliance, Hawaii PV Coalition, The Alliance For Solar Choice, Sunpower Corporation, Hawaii Department of Business, Economic Development, and Tourism (DBEDT), Blue Planet Foundation and Ron Hooson.

On May 7, 2015, Dutch Kuyper, CEO Parker Ranch and Jose Dizon, General Manager, Paniolo Power addressed the Hawai`i Economic Association at their monthly meeting held at the Plaza Club. 

The discussion included the decision by Paniolo Power to intervene in the merger proceedings and “the importance of customer value, portfolio management and risk assessment in utility planning. Paniolo Power will also provide an update on the progress of their initiatives.”

On May 20, 2015 Parker Ranch subsidiary Paniolo Power fired off its first set on Information Requests to HECO and NextEra in the merger proceedings.

Paniolo Power wants information on microgrids.

“Please describe whether NextEra supports the development of microgrids in Hawaii. Please describe why or why not. If NextEra supports the development of microgrids, please specify what steps NextEra might take to support such microgrids. If NextEra does not support such microgrids, please specify the steps NextEra would take to prevent the development of microgrids. If NextEra supports some types of microgrids but not others, please identify the types of microgrids NextEra does and does not support, and explain why.”

Paniolo Power also wants information on renting the HELCO grid.

“Please describe whether NextEra believes that Hawaii should adopt policies which would require the HECO Companies to allow wheeling over their electricity system. Please describe and provide copies of any wheeling agreements entered into by Florida Power & Light. Please describe and provide copies of any wheeling-related Florida Power & Light tariffs, including any tariffs intended to comply with The Federal Energy Regulatory Commission’s Open Access Transmission Tariff requirements. Please describe and provide copies of any wheeling agreements to which any other NextEra affiliate is a party and any wheeling tariffs used by any such affiliate.”

Many believe that the merger proceeding (Docket 2005-0022) and the DERS proceeding (Docket 2014-0192) are the two most complex and time-consuming regulatory proceedings that the Public Utilities Commission has ever dealt with. They are happening simultaneously.

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Friday, May 22, 2015

How I Plan to Spend My Summer

By Henry Curtis

The utilities file an enormous amount of data and documents in the current merger proceeding and in rate cases.

Some of it is relevant to one party but not to other parties. Some is irrelevant, especially the blank pages which have been labelled confidential. Some of the documents have unusual titles and therefore must be opened to discover what is inside. Finding the gems can be tedious.

The merger proceeding documents includes “LNG Imports to Hawaii:  Commercial & Economic Viability Study” (2012) which was written Galway Energy Advisors LLC and submitted to HECO.

The merger proceedings also includes a copy of a 1988 legal document between MECO and HC&S, a copy of a 1989 PUC Decision and Order regarding the HECO-AES Power Purchase Agreement, copies of various 1988-89 financial documents involving HEI and Citibank, and letters from the 1980s between the State and HECO regarding loans and Special Purpose Revenue Bonds.

Cutting edge issues often face a different initial fate. NextEra does not want to talk about the interisland cable. “Questions related to undersea transmission cables do not fall within the scope of this docket.”

NextEra also wants to limit the Smart Grid discussions. “In addition, as discussed above, to the extent the information request seeks to encompass the merits of the Smart Grid project, it is beyond the scope of these proceedings; accordingly, the Companies will construe the request consistent with the scope of this docket – specifically, as seeking correspondence related to the impact of the proposed change in control on the Smart Grid enterprise program.

Some community members have asked, can’t we get the PUC to order them to turn over relevant files? That question is actually way too early. Intervenors get to ask questions for another four months. Questions can be re-framed, re-directed and re-focused. Parties can sit down with HECO and NextEra and discuss the need to disclose various documents.

There are the current attempts by NextEra to restrict the right of intervenors to ask questions and to restrict intervenors from reviewing responses if they considered joining Kulolo can all been seen as tests of will, a jockeying for power and/or intimidation?

NextEra recently filed 12 Information Requests, one to each of twelve parties.

Is Sierra Club, its … members … likely to participate in any manner, either individually or with any group(s) or entity(ies), in any initiative(s) or effort(s) to acquire all of or a controlling interest in HEI or of one or more of the Hawaiian Electric Companies.”

The Sierra Club would have to answer yes if a single member might in the future sign a petition asking a potential decision-maker to convert HECO into a municipal utility or an electric cooperative.

NextEra then states if the answer is yes, “Identify any and all persons … [and] describe the Competitive Effort and/or Competitive Takeover Proposal in detail.”

Sierra Club is being asked to identify members they may not know, or who have positions they do not know and then to describe potential takeover approaches that may not yet exist.
The Sierra Club, like the other 11 parties to receive this Information Requests, can attempt to answer the question, appear to answer the question, or file something ambiguous.

In July the intervenors must file their testimony based on an anticipated 20,000-40,000 pages of documents. Then NextEra gets to file a pile of information requests to each intervenor. These questions can be asked over a two month span. Each question must be answered within two weeks.

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Thursday, May 21, 2015

Inside the NextEra-Heco Merger Tsunami

By Henry Curtis

Being inside the HECO-NextEra merger proceeding is very different than looking at it from the outside.

NextEra and the HECO Companies filed their direct testimony and exhibits in mid-April. 

The Public Utilities Commission, the Consumer Advocate and a dozen intervenors have asked HECO and NextEra over 1,000 questions. 

The first 500 answers contain over 3,000 pages of information and another 8,000 pages of attachments. There are another 500 answers which will arrive shortly.

In addition there are an unspecified number of pages that are designated “Confidential.” To view them the intervenors must sign confidentiality agreements.

Then there are additional documents which are labelled “Confidential & Restricted.” Only non-competitor intervenors can view these documents.

Questions can continue to roll in for another four months. Each question must be answered within two weeks.

Time management and file organization is critical. The intervenors must, in just two months, files their testimony regarding the merger and answer the questions posed by the Public Utilities Commission; that is, answer six questions with 16 subparts.

Then HECO and NextEra will ask numerous questions on the Intervenors' testimony. The intervenors' will have 2 weeks to answer each question.

HECO and NextEra just fired off their first information request. A single question was sent to a dozen intervenors regarding the Kulolo proposal.

This proceeding involves Applicants’ proposed change of control of the Hawaiian Electric Companies planned to be accomplished through NextEra Energy’s acquisition of the outstanding shares of Hawaiian Electric Industries, Inc. 

The Applicants seek to protect their competitively sensitive information developed to assess and implement the transaction from use by competitors who have not incurred the costs to develop information and analyses like those the Applicants make and use on a confidential and proprietary basis in their businesses.

Through various media articles, Applicants understand that there may be one or more groups, entities, or initiatives being formed and developed with the objective of exploring alternatives to the proposed merger that is the subject of this proceeding and that one or more parties to this proceeding may be involved in such efforts.

An example is the organization or coalition called Keep Our Utilities Locally Owned and Locally Operated (KULOLO), which, we understand from a May 7, 2015 Pacific Business News article, may have been recently formed, has had a number of conversations with interest groups, and is in the process of inviting more people and entities to be part of the coalition.

In order to protect Applicants’ competitive information and interests with respect to Applicants’ responses to various Parties’ information requests, Applicants have and will be designating various due diligence, projections and other commercially sensitive and competitive information as “Restricted Information” under Protective Order No. 32726.

This Restricted Information will be only authorized to those Parties for which Applicants have reasonable assurance that they are not engaged in and do not plan to engage in a competing acquisition of HEI or of a controlling interest in one or more of the Hawaiian Electric Companies.

In order for Applicants to determine which parties are entitled to such “Restricted Information,” please respond to the following.  If the responses to subparts (a) and (b) below are each an unqualified “no” and the response to (c) is an unqualified “yes”, then the responding party identified below will be entitled to such “Restricted Information,” under and subject to the terms of Protective Order No. 32726.

Is Sierra Club, its affiliates (including but not limited to upstream affiliates), management, board, members, employees or agents, or any of its consultants that are retained for purposes of the subject merger proceeding, participating or likely to participate in any manner, either individually or with any group(s) or entity(ies), in any initiative(s) or effort(s) to:

acquire all of or a controlling interest in HEI or of one or more of the Hawaiian Electric Companies (collectively referred to as a “Competitive Effort”)?; or

make a “Company Takeover Proposal” as that term is defined in Section 5.03(g) appearing at page 48 of the Agreement and Plan of Merger dated December 3, 2014, attached as Applicants Exhibit-13 (at p. 53) filed with the Commission on April 13, 2015?

If the answer to (a) (1) or (a) (2) is anything other than an unqualified “no” in any respect, for each such Competitive Effort or Company Takeover Proposal please:

Identify any and all persons and/or entities of any description involved in any respect with the Competitive Effort and/or Company Takeover Proposal;

Describe the Competitive Effort and/or Competitive Takeover Proposal in detail;
Identify any and all persons to whom information concerning the Competitive Effort and/or Company Takeover Proposal has been disclosed or with whom it has been discussed; and

Provide any and all documents evidencing, relating or referring to the Competitive Effort and/or Company Takeover Proposal.    

If the responses to part (a) (1) and (a) (2) above are both “no”, will Sierra Club agree to promptly notify Applicants in writing if it or any of its affiliates (including upstream affiliates), management, board, members, employees or agents, or any of its consultants that are retained for purposes of the subject merger proceeding, participates, or is likely to participate, in any such group(s), entity(ies), initiative(s) or effort(s), and also agree to immediately return to Applicants any and all Restricted Information that it may have received as of that time, unless otherwise agreed to by Applicants?

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Wednesday, May 20, 2015

NextEra is spending $46 million on the merger

By Henry Curtis

NextEra is spending a lot of money in its proposed acquisition of Hawaiian Electric Company (HECO) and its subsidiaries Maui Electric Company (MECO) and Hawaii Electric Light Company (HELCO). The details were provided in response to a question by Ulupono Initiative (UL-lR-29).

NextEra Energy (NEE)

Transaction Costs

Investment Banking
Legal - Outside Counsel
Legal - Internal Counsel
Filing Fees
Rating Agencies

Transition & Integration Planning Costs

Internal Payroll
Integration Consultant
Travel & Office Expenses


"Hawaiian Electric is not paying for any merger transaction expenses. HEI is paying for certain expenses that Hawaiian Electric is incurring to participate in certain merger related activities.” The merger costs will not be recovered by billing ratepayers.

The Applicants’ responded to Life of the Land (LOL-IR-46), “As of December 31, 2014, HEI incurred approximately $4.9 million (net of tax) for merger related activities” and to the Consumer Advocate (CA-IR-138), “As of March 31, 2015, Hawaiian Electric Companies have incurred the following:  Travel and other miscellaneous expenses $64,000, Consultant fees for integration $711,000.”

NextEra’s Eric Gleason is a 30-year Merger and Acquisition (M&A) specialist. He has been involved in 29 mergers and acquisitions around the world. NextEra provided the information in response to a question from Ka Lei Maile Ali`i Hawaiian Civic Club (KLMA-IR-21).

Asset Location
NextEra Energy, Inc.
Acquisition of HEI Industries, Inc. (pending)
Allegheny Energy
Sale to FirstEnergy Corp
Allegheny Energy
Sale of fiber business to NTELOS
Allegheny Energy
Sale of VA distribution operations
Sale to Sempra Energy
Sale of power plant portfolio to International Power
Energy East
Sale to Iberdrola SA
PPL Corporation
Sale of Emel to CGE
PPL Corporation
Sale of Del Sur to Ashmore Energy
El Salvador
Public Service Enterprise Group
Sale of Electroandes to SN Power
Sale of power plant to Itochu
FPL Group
Acquisition of Point Beach from Wisconsin Energy
Acquisition of power plant portfolio from Constellation
FPL Group
Acquisition of Duane Arnold from Alliant
Hastings Funds Management
Acquisition of Mid Kent Water from West LB
Allegheny Energy
Sale of Mountaineer Gas to Arclight
Merger with PSEG Corporation (terminated)
US, Latin America, Europe
CDC Globeleq
Acquisition of power generation assets from AES Corporation
Asia. Africa
Acquisition of Midlands Electricity from Aquila
PowerGen plc
Sale of generation assets to Edison International
Union Fenosa
Sale of power generation assets to National Power
AEM Milan
Privatization via share flotation
Investor AB
Merger of Stora and Enso
Yorkshire Electricity plc
Sale to AEP Corporation
Bechtel Group
Acquisition of 50% stake in Intergen from PG&E
Asia, Latin America
London Electricity plc
Sale to Entergy Corp
Sale of coal business to Beacon Group
Tractebel S.A.
Acquisition of CRSS Inc.
Magma Power Company
Raid defense and sale to CalEnergy
US, Asia

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