HomeMy WebLinkAboutCOM 0822.002 2010-2012 Indigenous Consultants, LLC
Mililani B. Trask, Principal
P.O.Box 6377 4, Hilo,HI 96720
Mililani.trask @gmail.com
Hawaii County Council September 4th,2012
1055 Kinoole Street, Suite 101
Hilo,HI 96720
Aloha County Council Members,
I am submitting this testimony on County Resolution #297-12, but am making =
recommendations for amendments.
The Resolution correctly cites the PUC ruling on the HELCO/Ormat contract relating to
geothermal development. In that opinion, the PUC noted that the existing PGV/ELCO
contract as not in the best interest of the public. However, the PUC did not issue any
other ruling relating to the energy producers in the last `Whereas' clause. The PUC has
not issued any fmding relating to the Apollo,enXco or Wailuku
Contracts. This is because geothermal resources are Trust assets of the public trust and
held by the State in trust for "native Hawaiians & the public". This is not the case with
the other avoided cost contracts negotiated by HELCO.
The PUC has singled out the PGV-Ormat/HELCO contract for several reasons:
#1. The PGV-Ormat/HELCO contract convers a public trust asset, geothermal
resources. Under trust law, there must be a direct"benefit"to the public &native
Hawaiians when geothermal is developed.
#2. PGV-Ormat&HELCO had formed a geothermal energy monopoly when they
negotiated their initial agreement. Under that old agreement, Ormat would get a
monopoly to produce geothermal energy for HELCO, and later Ormat-PGV
would sell %2 of their production plants to HELCO. As part of this monopoly, the
price was fixed to guarantee huge profits to PGV& HELCO at the expense of the
public rate- payers, including the County itself. When this was discovered it
prompted Hawaii Island State Senator Malama Solomon to call for an
investigation into price fixing.
(See letter dated March 11,2011 attached as exhibit 1).
[See Hawaiian Electric Industries and Ormat Energy Systems Announce
Execution of a Memorandum of Understanding Manning, Al. Business
Wire [New York] 25 Sep 1989: 1] Attached as exhibit 2.
Comm. No • )"2-• y
Ref.To:
Ref. Date
#3. The PGV-Ormat/HELCO contract covers 20%of the energy produced on our
island, so the over billing amounts to hundreds of millions of dollars. The cost to
Ormat-PGV is 8 cents a kwh,they sell to HELCO for 16 cents kwh(100%mark
up) and HELCO sells to Hawaii ratepayers at 43 cents — a total increase of
537.5%.
(See attached graphic exhibit 3.
#4. HELCO data indicates that the profit margin is so huge that HELCO Board
members are receiving over 5,2 million dollars per year in their `compensation'
package. See attached report by Bloomberg,attached as exhibit 4.
The draft Resolution should be amended to bring the focus back to the PGV-
Ormat/HELCO contract. The reference to the other avoided cost contracts should be
deleted as these contracts were not cited by the PUC, do not include public trust assets
and,in fact result in very little costs added to our rates.
There fore I recommend deletion of the last `Whereas' clause and instead recommend a
new section be added(second to the last provision) ...
"Be it Further Resolved that HELCO shall report back to the County Council within 30
days of the date of passage of this Resolution, the results of its efforts to renegotiate the
original PGV-Ormat/HELC contract covering the initial 25 megawatts. Specifically that
HELCO inform the County Council whether PGV-Ormat agreed or disagreed with
lowering the price for rate payers, and the amount of the decrease charged rate-payers, if
any decrease is agreed upon. In the event Ormat-PGV refuses to renegotiate the price,
HELCO shall notify the County Council of such refusal".
The Resolution asks HELCO to try to re-negotiate„ but it does not include any
requirement that HELCO report back to our Council & our island ratepayers. I have
spoken with HELCO who informed me that they were agreeable to lowering prices on the
first 25 megawatts, but that Ormat-PGV had refused. I think we should all know what the
discussions were & whether HELCO was agreeable to lowering prices. If Ormat-PGV is
responsible for not lowering rates, we all have a right to know as we all own these
resources.
Regards,
Mililani B. Trask—Indigenous Consultants LLC
4�+'•
., TSUTSUI •
LENT
DONNA MERCADO KIM
VICE PRESIDENT p }�
SAM SLIM Z�t brute
MINORITY LEADER
STATE CAPITOL
HONOLULU,HAWAII 96813
FIRST DISTRICT March 11, 2011
MALAMA SOLOMON
SECOND DISTRICT
GLBERT OHRE David M. Louie,Attorney General
THIRD DISTRICT Department of the Attorney General
JOSH GREEN,M.O.
FOURTH DISTRICT 425 Queen Street
SHAN S.TSUTSIB Honolulu, Hi 96813
FIFTH DISTRICT
ROSALYN H.BAKER Aloha,
SIXTH DISTRICT
J.KALANI ENGLISH
SEVENTH DISTRICT In Lieu of a Senate Concurrent Resolution the Senate Committee on Water, Land and
RONALD D.KOUCHI Housing, is requesting you,as Attorney General State of Hawaii to investigate the contract
EIGHTH DISTRICT
SAM D„ between the Puna Geothermal Venture and Hawaiian Electric Light Company,including
NINTH DISTRICT rate charges and ongoing operations.
LES IHARA,JR,
TENTH DISTRICT
BRIAN T.TANIGUCHI The Committee acknowledges,that the geothermal resources are"minerals"pursuant to
ELEVENTH DISTRICT Hawaii law,and are an asset of the ceded lands trust,belonging to the public and Native
CAROL FUKIMAGA
Hawaiians.
TW TISTRICT
GALUTERIA
THIRTEENTH DISTRICT Therefore,the residents of the Island of Hawaii,who are ratepayers and equitable owners
SUZANNE CHUN OAKLAND
FOURTEENTH DISTRICT of geothermal resources,are entitled to receive a direct benefit from the development of
DONNA MERCADO KIM their energy trust assets in the form of affordable rates for electricity produced from
I
FIFGLEENNTH DISTRICT geothermal resources.
SIXTEENTH DISTRICT
DAVID Y.'GE To the Committee's knowledge,Puna Geothermal Venture,which is owned by Ormat
SEVEN�TEEENTHDISTRICT Technologies(PGV/ORMAT),and the Hawaiian Electric Light Company(HELCO)entered N.
EIGHTEENTH EIGHTEE NTH DISNISTRICT into a private contract for the development of publicly owned geothermal resources for
the production of thirty megawatts of electricity for the Island of Hawaii commencing in
NINETEENTH DISTRICT
MIKE GABBARO 1993,for a term of more than thirty years.
TWENTIETH DISTRICT
HALL`SPEI° The terms of the PGV/ORMAT and HELCO contract were never publicly disclosed,nor were
TWENTY-FIRST DISTRICT
MALE St SIW RUKURO the negotiations transparent.
TWENTY-SECOND DISTRICT
DONOVAN II DELA CRUZ
Hawaii Business Magazine reported in its November 2,2010 edition that the charges and
TWENTY-THIRD DISTRICT
CLAYTON HEE rates assessed to the Island of Hawaii's ratepayers under the initial contract were based on
TWENTY-FOURTH DISTRICT the price of oil,and not on the actual costs of production and distribution of electricity
ALL N.TOKUOA
TWENTY-FIFTH DISTRICT incurred by PGV/ORMAT and HELCO.These charges and rates assessed to the Island of
POHAI RYAN Hawaii's ratepayers should have been based on the actual value of geothermal electricity.
CHIEF CLERK
CAROL TANIGUCHI
Although PGV/ORMAT acknowledges that they used an avoided cost formula under the
United States Public Utility Regulatory Policies Act(PURPA),which they interpreted as
allowing them to charge consumers at rates based on the price of oil.The Committee
concluded all profits resulting from the lower costs of generating electricity by geothermal
energy were retained by PGV/ORMAT.
4"',i c.1
Page 2
For seventeen years, ratepayers of the Island of Hawaii have been assessed charges of
seventeen to twenty percent of their electricity consumption based on oil consumption,
rather than the actual costs of electricity generated from their own publically owned
geothermal resources.
It is apparent, under the terms of the initial PGV/ORMAT—HELCO contract,cost savings
from the generation of electricity from geothermal resources have not been passed on to
consumers, but have been retained by the PGV/ORMAT and HELCO.The Committee
agrees with native Hawaiian advocate,Mililani Trask,this practice is inherently unfair.
HELCO and PGV/ORMAT have agreed to implement a more equitable formula for sharing
avoided cost savings with the Island of Hawaii's ratepayers for electricity costs incurred
from twenty-five to thirty megawatts and from thirty to thirty-eight megawatts.
However,they continue to charge the Island of Hawaii's ratepayers costs based on oil for
twenty-five megawatts of electricity,resulting in a huge windfall of profits for PGV/ORMAT
and HELCO under the remaining fifteen years of the original contract.
The recent negotiations between HELCO and PGV/ORMAT for a more equitable formula
for assessing electricity rates from twenty-five to thirty-eight megawatts,demonstrate
that the contracting parties are capable of re-negotiating their original contract to
decrease rate charges for twenty-five megawatts under their original contract.
In conclusion,the Senate Committee on Water,Land and Housing concur that the
Attorney General is requested to conduct an investigation and audit of:
(1) The initial contract and Power Purchase Agreement between PGV/ORMAT and
HELCO,including the terms,agreement,and formulas utilized by the contracting
parties under which they determined the value of the profits generated through
avoided costs that PGV/ORMAT and HELCO retained for themselves.
(2) The profits and benefits that accrued to PGV/ORMAT and HELCO from their
development of state owned geothermal resources,as well as the amount or
revenues each received over and above the actual costs of generation and
transmission of electricity generated from geothermal resources.
(3) The annual and total amount of revenues paid by the Island of Hawaii's
ratepayers to PGV/ORMAT and HELCO for oil generated electricity that they did
not consume but were billed for from 1993 to 2011.
(4) The current actual cost of PGV/ORMAT for generating one megawatt of
electricity from the PGV/ORMAT Plant(reportedly 8 cents per megawatt)and the
price at which they sell each megawatt to HELCO(reportedly 16 cents per
megawatt),as well as the actual cost to HELCO for transmission of geothermal
electricity to the Island of Hawaii's ratepayers who are charged 39 cents per
megawatt by HELCO;and whether this agreement has resulted in significant
profits to PGV/ORMAT and HELCO at the expense of ratepayers.
ProQfst
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Document 1 of 1
Hawaiian Electric Industries and Ormat Energy Systems
Announce Execution of a Memorandum of Understanding
Manning,Al. Business Wire[New York]25 Sep 1989: 1.
Find a copy
Search for full text
Abstract
Hawaiian Electric Industries Inc. (HEI)of Honolulu, and Ormat Energy Systems Inc.of Sparks, Nev.,
Monday announced the execution of a Memorandum of Understanding to jointly develop geothermal
power plants on the island of Hawaii.The parties said they hope to enter into a final partnership
agreement by the end of October. Under the terms of the Memorandum of Understanding, Ormat will
sell 50 percent of its subsidiary Puna Geothermal Ventures(PGV)to HEI subsidiary Hawaiian Electric
Renewable Systems(HERS). Ormat will continue to be the managing partner for geothermal projects
to be developed by the partnership. (excerpt)
Full Text
Hawaiian Electric Industries Inc. (HEI) of Honolulu, and Ormat Energy Systems Inc. of
Sparks, Nev., Monday announced the execution of a Memorandum of Understanding to
jointly develop geothermal power plants on the island of Hawaii.
The parties said they hope to enter into a final partnership agreement by the end of October.
Under the terms of the Memorandum of Understanding, Ormat will sell 50 percent of its
subsidiary Puna Geothermal Ventures (PGV)to HEI subsidiary Hawaiian Electric Renewable
Systems (HERS). Ormat will continue to be the managing partner for geothermal projects to
be developed by the partnership.
PGV is the first company to receive necessary government approvals to develop a
commercial geothermal energy plant in Hawaii. A 25 megawatt plant is expected to be
operational by the end of 1990. PGV has a contract to sell electricity produced by the plant to
Hawaii Electric Light Co., which serves the island of Hawaii.
In addition to PGV's 500 acre power plant site, PGV has surface rights on another 10,000
acres in the Puna district of the island, with mineral lease rights on 4,500 of those acres. A
small experimental geothermal power plant owned by the State of Hawaii has been operated
in this area since 1982.
Hezy Ram, president of Ormat Energy Systems said: "We see a great deal of synergy in
joining forces with HEI. Ormat brings 25 years of worldwide leadership in developing
pollution-free power plants utilizing locally available heat sources, as well as the track record
of developing and operating nine geothermal power plants, with two more under construction.
"HERS, on the other hand, is uniquely positioned to assist the partnership in all matters
pertaining to doing business in Hawaii."
HEI President C. Dudley Pratt, Jr. said HEI "is pleased to be an active participant in the
development of geothermal energy in Hawaii. Ormat has an excellent record of
environmental protection wherever it has built geothermal energy plants. HEI is committed to
being a leader in renewable energy development in the state, and our agreement with Ormat
supports this goal."
HEI's other renewable energy projects in Hawaii are windfarms on the island of Hawaii and
Oahu. The Oahu facility includes the world's largest horizontal axis wind turbine now in
operation, the Boeing MOD-5B.
Indexing (details)
Subjects Partnerships, Pacific, Mountain,Joint ventures,Geothermal energy,
Electric power plants,Alternative energy sources
Locations US, Honolulu, HI
Company/Org Puna Geothermal Venture
Ormat Energy Systems Inc
Hawaiian Electric Industries Inc
Classification 8340:Electric,water&gas utilities,2310: Planning, 1510: Energy
resources
Title Hawaiian Electric Industries and Ormat Energy Systems Announce
Execution
of a Memorandum of Understanding
Authors Manning,Al
Publication title Business Wire
Pages 1
Number of pages 0
Publication year 1989
Publication Date Sep 25, 1989
Year 1989
Section 1
Publisher Business Wire
Place of Publication New York
Country of publication United States
Journal Subjects Business And Economics
Source type Wire Feeds
Language of Publication English
Document type WIRE FEED
Subfile Partnerships, Pacific, Mountain,Joint ventures, Geothermal energy,
Electric power plants,Alternative energy sources
Accession number 89-34070
ProQuest Document ID 447093314
Document URL http://search.proquest.com.ezproxy.canterbury.ac.nz/docview/447093
314?accountid=14499
Copyright Copyright Business Wire Sep 25, 1989
Last updated 2010-06-30
Database ABI/INFORM Complete
«Link to document in ProQuest
Contact ProQuest
0 2010 ProQuest LLC.An rights reserved.-Tense and Condition
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Constance Lau:Executive Profile&Biography-Businessweek 9/4/12 11:40 AM
UTILITIES SECTOR » ELECTRIC UTILITIES INDUSTRY » HE
Hawaiian Electric Inds (HE:New York)
Last$26.55 USD Change Today+0.02/0.08% Volume 122.9K HE On Other Exchanges
As of 1:05 PM 09/4/12 All times are local(Market data is delayed by at least 15 minutes).
Snapshot News Charts Financials Earnings People Ownership Transactions Options
Overview Board Members Committees
Executive Profile*
Constance H. Lau
Chief Executive Officer, President, Director, Member of Executive Committee,Chairman of American Savings
Bank,Chairman of Hawaiian Electric Company Inc,Chief Executive Officer of American Savings Bank and
President of American Savings Bank,Hawaiian Electric Industries Inc.
Age Total Calculated Compensation This person is connected to 87 board members in 6 different
59 $5,296,975 organizations across 6 different industries.
As of Fiscal Year 2011
See Board Relationships
Background*
Ms. Constance H. Lau has been the President and Chief Executive Officer of Hawaiian Electric Industries Inc.
since May 2, 2006. Ms. Lau served as the Chief Executive Officer of American Savings Bank, F.S.B.,
Hawaii's third-largest financial institution since June 2001 and Chief operating officer and Senior Vice
President from December 1999 to June 2001. She also served as President and Senior Executive Vice
President of American Savings Bank, F.S.B. She served as Treasurer...
Read Full Background
Corporate Headquarters* Annual Compensation*
900 Richards Street Salary $815,000
Honolulu, Hawaii 96813
Total Annual Compensation $815,000
United States
Stock Options*
Phone: 808-543-5662
Fax: 808-543-7602 Restricted Stock Awards $1,951,782
All Other Compensation $31,137
Board Members Memberships* Exercised Options 112,775
Chairman of the Board Exercised Options Value $807,871
American Savings Bank, F.S.B.
Exercisable Options 101,831
Former Director Exercisable Options Value $38,000
Alexander& Baldwin, Inc. Total Value of Options $845,871
2004-Present Total Number of Options 214,606
Director and Member of Audit Committee
Matson, Inc. Total Compensation*
file:///Users/MBThawafi/Desktop/Constance%20Lau:%20Executive%20Profile%20&%20Biography%20-9620Businessweek.webarchive Page 1 of 2
Constance Lau:Executive Profile&Biography-Businessweek 9/4/12 11:40 AM
2006-Present Total Annual Cash Compensation $1,699,359
Chief Executive Officer, President, Director, Total Short Term Compensation $815,000
Member of Executive Committee, Chairman of
American Savings Bank, Chairman of Hawaiian Other Long Term Compensation $1,982,919
Electric Company Inc,Chief Executive Officer of Total Calculated Compensation $5,296,975
American Savings Bank and President of
American Savings Bank
Hawaiian Electric Industries Inc.
2006-Present
Chairman,Chief Executive Officer of Hawaiian
Electric Industries Inc, President of Hawaiian
Electric Industries Inc and Director of Hawaiian
Electric Industries Inc
Hawaiian Electric Company Inc.
Education*
MBA
Stanford Graduate School of Business
Unknown/Other Education
Punahou School
Bachelor's Degree
Yale College
JD
Hastings College of Law
Other Affiliations*
Matson, Inc.
Punahou School
Kamehameha Schools Bernice Pauahi Bishop
Estate
American Savings Bank, F.S.B.
Stanford Graduate School of Business
Consuelo Zobel Alger Foundation
Hastings College of Law
Yale College
Federal Reserve Bank of San Francisco
Hawaiian Electric Company Inc.
Alexander& Baldwin, Inc. •
*Data is at least as current as the most recent Definitive Proxy.
Report Data Issue
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