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AWESC-4 Page 3 September 5, 2012 <br />the urgency. Mr. Yoshimoto asked if the amended agreement would have to go back to the PUC <br />for approval. Mr. Ignacio confirmed that it does. <br />The amendment submitted via Communication No. 822.1 passed unanimously (Mr. Blas, Mr. Ikeda <br />and Mr. Pilago were absent). <br />Ms. Ford asked if they are negotiating to lower their wholesale (utility) cost or the retail <br />(consumer) cost. Mr. Ignacio explained that they are negotiating the rate that they pay to PGV <br />for the energy that is sold to HELCO. If they can lower the cost, then the savings can be passed <br />on to customers. HELCO doesn't make any profit from the energy that is purchased from the <br />power producers. Ms. Ford then asked Mr. Ignacio if the chart from Ms. Trask (Communication <br />No. 822.2) was accurate. It shows the production cost at eight cents/kilowatt-hour (kwh), the <br />cost to the utility at 16 cents/kwh, and the cost to the consumer at 43 cents/kwh. Mr. Ignacio <br />replied that it may be a little outdated. Mr. Verbanic said last month's avoided cost was <br />19 cents/kwh for on -peak hours. Mr. Ignacio explained that the difference between the cost to <br />utility and the cost to consumer goes towards other operating expenses. Ms. Ford stated that part <br />of the problem is that Hawai`i's PUC needs to do more. She pointed out that California's PUC is <br />the nastiest and is totally committed to protecting the consumer. <br />Ms. Ford is concerned that with fixed overhead costs and having to keep the shareholders happy, <br />the negotiations may reduce costs by only one or two cents. Mr. Ignacio explained that <br />HELCO's biggest cost is fuel and purchase power, which is 60 percent of the bill. HELCO is <br />trying to reduce that by reducing payments to the independent power producers. Even if the fuel <br />and purchase power costs were reduced, HELCO will still have huge fuel bills, which is why <br />HELCO signed a contract with Hu Honua in order to have generation that is not dependent on <br />oil. Hu Honua would be dependent on biomass, so as oil prices fluctuate, customers will not <br />have the burden of that fluctuation. HELCO is also going for a RFP for more geothermal. If <br />approved, that set of energy will not be linked to fossil fuel. Mr. Ignacio explained that to reduce <br />the fuel and purchase power costs, HELCO will have to enter into more contracts with <br />independent power producers, and in order to do that, HELCO needs to be financially healthy. <br />Mr. Hoffmann feels that the Administration and the Council are not doing enough. Government <br />needs to work together with the community. He urges all of Hawai`i's mayors and county <br />councils to work together to address this issue. <br />Mr. Yoshimoto explained that the Council has no authority over the PUC, so something needs to <br />be done at the State level to address these issues. The purpose of this resolution is to show these <br />companies that the people care. And because the Council has no authority, the Council cannot <br />mandate or demand, it can only suggest to the companies to go back to the drawing table. <br />Eventually, the contracts will end, so this may give the companies some incentive to provide a <br />better deal to consumers in order to extend their contracts. <br />Mr. Yagong noted that Mike Kaleikini, Plant Manager for PGV, was in the audience. He <br />informed Mr. Kaleikini that the consumers don't have three years to wait for negotiations to <br />complete. Mr. Yagong is encouraged that HELCO and PGV have already initiated negotiations, <br />