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HomeMy WebLinkAboutCOM 0781.000 1980-1984 • .11110k ORDINANCE Intr. By: Reten. Re: Establish a Municipal Energy Agency Refer: C-781/PC- MB No. Bill Amends Article 5, Chapter 2, of the Hawaii County Code, as amended, to add a new section relating to the establishment of a Municipal Energy Agency in the County of Hawaii . PC - 4/30/82 ' j 4�$�ay • V `o .•t f Or Nq;Yy; �TI:1'III:\K 5..111.1'4IIRc1 • �l - .it 1, • (:havmrn Oar .P Of COUNTY COUNCIL Cmuily of 1l uaii Hawaii County 13u:Lli,ig Hilo, Hawaii 96720 April 30 , 1982 • TO; CHAIRMAN, COMMITTEE ON PLANNING FROM: COUNCIL CHAIRMAN STEPHEN YAMASHIRO • RE: PROPOSED ORDINANCE TO ESTABLISH A MUNICIPAL ENERGY AGENCY IN THE COUNTY OF HAWAII I am transmitting for full, study and recommendation, the following : (1) Draft of a bill for an ordinance to establish a Municipal Energy Agency in the Count y of ,Hawaii; (2) Response from Dan Williamson of Hawaiian Electric Company , Inc. ; (3) Response from David L. Fairbanks of Goodsill, Anderson & Quinn; (4) Response from John P. Keppeler, II , Inc. ; and (5) Response from Councilwoman Helene H. Hale. Atts . • COMM. NO. 78 To: PC 1 MM.?, Bill No. COUNTY OF HAWAII - STATE OF HAWAII ORDINANCE NO. AN ORDINANCE AMENDING ARTICLE 5 , CHAPTER. 2 , OF THE HAWAII COUNTY CODE, AS AMENDED, TO ADD A NEW SECTION RELATING TO THE ESTABLISHMENT . OF A MUNICIPAL ENERGY AGENCY IN THE COUNTY OF HAWAII . BE IT ORDAINED BY THE COUNCIL OF THE COUNTY OF HAWAII : SECTION 1 . Article 5 , Chapter 2 of the Hawaii County Code , is amended to add a new section to read as follows : "SEC. 3. Hawaii County .-Energy Agency - "SEC. 3. 01 . Policy and Purposes . The potential energy sources found within this county .ire_ valuable natural resources which must be properly- managed and developed sd to benefit our county as a whole . To insure—this , the: -authority -to-- manage and develop these energy sources must be centralized and concentrated within a single public agency . The Hawaii County Energy Agency is created for this purpose . ^ In addition' it shall carry out the _ objectives and excercise the powers &raanted to the County of Hawaii through Act 36 , Session .Laws of Hawaii 1978 . + "SEC. 3. 02 . Hawaii County Energy Agency. An agency to be known as the Hawaii County Energy Agency is created to manage and develop the energy sources found within this county . The agency shall consist of all memhe,1_s. of the County (•auncI ] . When the County Council acts as the lliwai i County Energy Agency ; • l • • its role shall include public energy policy formulation and the administration of energy programs through the director of this agency. ' "SEC. 3 . 03. Powers of the Hawaii County Energy Agency. "A. The Hawaii County Energy Agency shall have the following powers to : " (1) - Authorize and issue bonds under Chapters 47 and 49, HRS , to provide moneys to carry out the purposes of this section including the satisfaction of any guarantees made by, the County pursuant to this section; " (2) Appropriate moneys -of the County to carry out the purposes of this section; _"(3) Obtain insurance and guarantees from the- State • or the United States , or subsidies from either; - " (4) .. Acquire necessary land by_ dedication, lease , purchase , exchange or eminent domain ; " (5) Adopt such rules pursuant to Section 46- 19 , HRS, as are necessary to fulfill the purposes of • - this ordinance . _..._— — --- "B. In order to carry out the aforementioned powers , the • Hawaii County Energy Agency may : - - - ---- " (1) - - I-nvestigate , prepare and - re-view plans .-for ' - county-wide energy management and development ; • " (2) Develop and manage energy resources found within this county , alone or in joint venture with public or private developers ; " (3) Apply for and utilize Federal and State developmental grants and loans ; - " (4) . Recommend future studies or actions su.c.h_ as detailed market studies and invitations to prospective bondholders ; " (5) Contract with an end user or public ;utility for the sale of energy . generated; " (6) Utilize acquired public and private lands for the purposes of this section; . " (7) Contract for the construction of facilities -- necessary to the furtherance of this ordinance ; : - ... ._..j' (8) Evaluate- the progress of existing. developme.nta l plans ; - - " (9) Adopt such rules pursuant to Chapter 91 , HRS , N as are necessary to carry out the purposes of this section. "C. All instruments and documents relating to the energy __programs of the Hawaii._- County Energy Agency . shall be signed by the director of the agency . Any and all contract between the County and the United States Department of _ _ Energy shall be_submitted to the_Hawai.i County Energy Agency for its approval and any such contract shall be executed by the Director of Energy Management 'and Development . • • • "SEC. 3 . 04 . Director of Energy Management and Development . There- shall be a Director of Energy Mavagement 'and Development who shall be appointed by the County Energy Agency and may be removed by the County Energy Agency. • • "SEC. 3. 05. Duties of the Director of Energy Management ' and Development. The Director of Energy Management and Development shall have direct responsibility for the . development and management of Hawaii County Energy Programs and shall be' under the direct supervision and control of the County Energy Agency. The . agency director shall also have the authority and responsibility to staff the agency with necessary personnelcarr to out the Y purposes of the agency. It shall be the duty of the director • of the agency to coordinate operations and programs of the • Hawaii County Energy Agency with applicable State and Federal Energy - Programs . All programs and contracts with the federal government to carry out the purposes of the Hawaii _County Energy Agency shall Be prepared by the director and submitted to the County Council for approval . : — - • --- --- -- - • - • - - SECTION 2. In the event that any portion of this ordinance is held invalid, the invalidity shall not affect the other parts of this ordinance whose provisions are declared to .be severable . SECTION 3. This ordinance shall take effect upon approval . • INTRODUCED BY: COUNCI L MEPMBER,COUNTY 01: IIA11A 11 Date of Introduction : • • Date of Adoption : • Effective Date : i41111 HAWAIIAN ELECTRIC COMPANY, INC . Box 2750 Honolulu, Hawaii 96840 HARWOOD D.WILLIAMSON VICE PRESIDENT.PLANNING July 28 , 1981 The Honorable Stephen K. Yamashiro Hawaii County Council Chairman Hawaii County Building Hilo, Hawaii 96720 Dear Councilman Yamashiro: This is in response to your letters dated July 1 addressed to Fred S. Johnson, President of Hawaii Electric Light Company,m and me asking for our comments on your preliminary P draft of the proposed ordinance establishing the Hawaii County Energy Agency. As I understand it, the rationale behind this proposal is to generate additional revenues for the County of Hawaii from geothermal development on the Island. Although we can certainly understand your. concern for the need to raise additional revenue, we respectfully take exception to the proposed means of accomplishing that • end. We do share your concern over the cost of energy on the Island Of Hawaii and feel that, ultimately, alternate energy projects such as geothermal development will make Hawaii not only energy independent, but will also provide lower energy costs than if we continue to use oil. Furthermore , geothermal development on Hawaii will provide new construction, added jobs , an increased real property tax base, and other benefits , even without the establishment of the Hawaii County Energy Agency. Our reasons go to the very heart of the free enterprise system. As we understand the respective roles of government and business, it is quite appropriate for government to undertake research and development and, possibly, demonstra- tion projects, particularly when such projects are in the public interest and private enterprise has not shown a willingness or ability to undertake such projects . In the final, commercialization stage , however , government ' s financial involvement, including government ' s ownership or control, would seem inappropriate , particularly when private enterprise has shown not only a willingness , but a strong desire, to undertake such projects . HARMAN AN ELECTRIC COMPANY, Ih• The Honorable Stephen K. Yamashiro Page 2 As indicated above, your proposal appears to be directed, at least initially, toward geothermal development on the Island of Hawaii. In the case of geothermal development, a strong interest has already been expressed by private enterprise. In response to Hawaii Electric Light Company ' s "request for proposals" (RFP) , three separate proposals were received for the development of geothermal power. Consequently, it cannot be argued that there is no interest by private • enterprise. It should also be pointed out that, as best as we can determine, the RFP accelerated the development of geothermal energy on Hawaii. Commercialization of a full- scale geothermal plant is now anticipated much earlier than previously expected. Furthermore, the businesses that responded to the RFP are • prepared to take risks attendant with geothermal development, risks which I might add can be considerable. However, risk taking of this nature is a proper and accepted role for private enterprise in the commercialization phase. We would seriously question whether this type of risk taking is appropriate for the governmental sector, particularly when private enterprise is already occupying the field. ,Another Serious concern is raised as to whether the active involvement of government in the geothermal development picture at the commercialization phase, potentially in competition with the three respondents to Hawaii Electric ' s RFP, will cause one or all of them to withdraw from the field. If this happened, we feel it would be most unfortunate and also not what you intended by your -proposal, We also understand that you have expressed a concern that, if geothermal energy is transmitted .to any of the other islands in the State by undersea cable, Hawaii County should be in a position to levy a .special tax or charge on such energy being transmitted to the other islands . The State Legislature has had a long established policy of looking at the State as a whole and attempting to insure that each county is in a relatively financially viable position . To allow one island to tax another island or impose a surcharge on exported energy would be a dramatic change in this historical policy, a policy which has allowed the State as a whole to grow and remain financially healthy. IIR' All It) 1(177 - - 4411 HAWAIIAN ELECTRIC COMPANY, INC. The Honorable Stephen K. Yamashiro Page 3 Finally, there is another possible underlying aspect to the . . proposal which is troublesome. There appears to be the possibility that if the County Energy Agency does not own or operate the generating plant, it can nevertheless regulate its activities. If this type of regulation is directed at controlling the price of geothermal energy, it would be a duplication of government effort because the State Public Utilities Commission is already charged with this responsi- bility. In fact, it could be argued that this proposal seems to reflect a certain amount of blurring of the separa- tion between the legislative and executive branches of government. As we said at the outset, we can understand your underlying goal of raising additional revenue for the County of Hawaii . However, we respectfully urge you to reconsider your proposal, to do it by establishing the Hawaii County Energy Agency. We will be happy to discuss this matter further with you any time at your convenience. Sincerely, 'e •�3, �® 410 . • P. O. Box 3196 Honolulu, Hawaii 96801 • _.�._.. July 30, 1981 The Honorable Stephen K. Yamashiro Chairman & Presiding Officer • County Council County of Hawaii Hawaii County Building Hilo, Hawaii 96720 Dear Steve: This is a brief and very preliminary response to your letter dated July 1, 1981, concerning the proposed Municipal Power Agency. I must plead overwork and lack of time. In addition, I am fleeing the country for three weeks and will not be able to meet your "deadline. " • While I sympathize with the County' s need for increased revenues , I have some serious reservations about the proposal on philosophical , legal and practical grounds . As we' ve discussed previously, I am not a great fan of government intervention in areas that are appropriate for private enterprise, and I believe this is one of the areas • best left to private enterprise. There are other ways to produce revenues , and the development of alternate sources of energy in Hawaii will have direct economic benefits for the Big Island. There is a serious question whether the proposal conflicts with the State ' s claim of ownership of geothermal steam. The Agency ' s "regulation" may be viewed as an ittempt by the County to do indirectly what it cannot do direeLl - . - 411 411 The Honorable Stephen K. Yamashiro Page Two This would be particularly true if the Agency used or intended to use the power of eminent domain to carry out the intent of the proposal . In effect, use of eminent domain could be construed as condemning the resource or exercising indicia of ownership. Of course , there is a threshold question whether the Agency itself would have the power of eminent domain. The proposal also sets up another potential conflict between State and County interests . It is quite possible that the State and other counties would view the Agency as an attempt to tax their citizens or exercise control over a State resource which should be for the . benefit of all the people of the State. It is not clear whether the proposal is limited to geothermal steam. By its terms , it appears to include all energy sources . The proposal is extremely broad, even in light of the broad language of H.R. S. 5 46-19 . The County may proceed to develop such sources only when a • joint venture partner is not available. Consequently, questions may be raised as to the "availability" of a joint venture partner , as well as whether the • Agency, by virtue of development of any energy source (in any given instance) , becomes a "public utility" within the meaning of Chapter 269 .. I also have some serious reservations about the members of the Council constituting the Agency or its "board of directors. " This raises the possibility (if not the probability) of lack of continuity and general . operations fraught with political overtones (present Chairman excepted) . In short : instability and lack of direction. In addition , the proposal to have Council • members constitute the Agency or its board may result in a blurring of , if not a direct conflict between the legis- lative and executive functions of our system of government . This is merely a brief outline of some initial potential problem I see in the proposal. There are other problems which I have not aid- dressed but can he discussed at a later. date . Ilowevcr , T + S' 411 411 The Honorable Stephen K. Yamashiro Page Three did not want you to think that I was ignoring your letter. See you when I return. Sincerely, avid L. Fairbanks DLF:j y • • dultan ll1. a�lliqualla it Ell, kw,. . f;vY��, 1 iiu�. SUITE 1060, PIONEER PLAZA 900 FORT STREET MALL/HONOLULU. HAWAII 96813/TELEPHONE:(808)526-1344 - I I FR i [-- • July 31, 1981 JACK KEPPELER "1114 President ,.„ The Honorable Stephen K. Yamashiro - Chairman and Presiding Officer County Council County of Hawaii Hawaii County Building Hilo, Hawaii 96820 • Chairman and Members of ' the County Council : Thank you for this opportunity to comment on the preliminary draft of a bill for an ordinance that would establish a munic- ipal power agency with broad powers. The County ' s policy toward home grown and renewable energy de- velopment and the efficiency of it ' s use will have a significant impact on how energy independent the Big Island of Hawaii will be in the future. Certainly the financial well-being of her residents will be determined, in part , by the amount and cost of . energy supplies available to future generations. Today 's actions • or inactions will lead to very different outcomes in a decade or -- two. The vital importance of reliable and relatively inexpensive energy supplies to the economic vitality of a future society need not be elaborately labored here; you are very much aware of the significance . Unfortunately, everyone ' s .desire to gain an immediate relief to the sharp increases we have experienced since 1974 in electrical , synthetic natural gas , diesel and gasoline prices cannot be sat- isfied by a simple and singular program. Relief cannot be gained without hard work. The only effective program will be to incre- mentally reduce our energy dependence on imported sources through using less energy and with cost-effective , local and renewable substitutes . It is a reasonable and attainable community goal , in my view , to achieve a high level of energy self-sufficiency for the Big Is- land. That goal will take considerable and well placed effort to attain. And the drive to energy independence will take time , - -decades, not elective terms . The pay-off from energy self sufficiency to future residents must • • t: l` e _ ,.. " .\r 1\\ 1 r I` 411 110 July 31, 1981 Page 2 • and can come from: 1) assured supplies of electricity and mobile fuels from local rather than brought-in re- sources; 2) lower energy pricings based on the abundance of developed, local supplies of electrical energy and mobile fuels that cannot be driven- up in price by world-wide supply manipulations, but driven down by competing suppliers, and 3) increased employment caused by local industry created to construct , operate , and maintain the needed facilities to convert the natural energy forms that will displace overseas oil . Further, this community ' s economic pay-off would be increased by the pride in itself in rising to the challenge of converting • adversity into advantage. The accomplishment of leaving for future generations a richer society on the Big Island will be very rewarding and a necessary discharge of it ' s group respon- sibility to those that follow. This accomplishment will be with- out precedent , and will preceed the energy self-sufficiency ef- .forts of many other communities that must take place as the fos- sil fuel supplies -run out . And they will run out ! , • Not to encourage conservation and alternative energy development will lead Hawaii County into a greater dependence on petroleum as the island's population grows - - the forecast is that nearly sixty thousand more people will live on the Big Island in twenty . (20) years. That increasing reliance on diminishing and, there- fore, more costly fossil fuels (oil and coal) , in the future, will make Hawaii very much more vulnerable to world supply dis- ruptions and price manipulations that will come about more fre- quently due to reduced energy supplies in the next century. . That future vulnerability will make the Island of Hawaii a less desirable place to live and we will have failed our challenge and responsibility. • The issue is not if the County of Hawaii should be involved in energy , but in what way and to what degree should it be involved . How can you get the maximum social benefit with the least inter- ference in the Big Island citizen ' s lives and a the least burden to their pocket-books? That is the County Council ' s challenge this summer! July 31, 1981 Page 3 The County should not take-on the entire responsibility to man- . age the development of natural energy resources found on Hawaii as called for in this bill. Nor should it even "appear" to try to pre-empt the field. • Certain parts of the program to increase the island' s energy • self-sufficiency are well beyond local control or influence. In- creasing the energy use efficiency in vehicles and appliances is an example of things that will be determined elsewhere. The in- troduction of new energy products and equipment (i . e . , electri- cal vehicles , gasohol , solar water heating systems, etc . ) are other examples. The job of -directing energy resource development and conserva- tion for a community the size of the Big Island of Hawaii is a large and complex task. And there is no need to create a big, new agency staff when. the management to respond to these tasks already exists in the private sector and only needs to be encour- aged to perform for Hawaii. • The Big Island community can get the maximum social benefit from • this change from an eighty percent (80% ) oil dependence to a de- pendence of about 1/3 in twenty (20) years by maintaining a small agency. This County agency would assist individuals, community groups and commercial interests in their efforts to make the change happen and save people money. The municipal government should primarily rely on and be encour • - aging of the private sector ' s commercial performance to do much of the job . There will be a very necessary role for the County to fill-in the gaps left out by the commercial people or to "make-a-point" by demonstration (examples : gasohol and electric powered vehicles, windpower or photovoltaic facilities, etc. ) . But this reliance on the private investors and managers , as op- posed to a public-run agency , has to be based on some community trust in the profit motive and the competitive forces brought. out in the market place for the community ' s benefit . If there is an inordiante fear of the word "profit" and a vain hope that • groups of individuals , like you and me , are willing to put their . time, money, organization and innovation up to risk at little or no return (profit ) , then the chance to make the transition rapid- ly to stabilized energy prices is decreased considerably . It is delayed by the fact that the very large job will have to be clone entirely by the County . And time is not on th'e side of people trying to save money on energy . • • L • I •, July 31, 1981 Page 4 Because energy, in forms such as gasoline and electricity, is • something that everyone purchases nowadays , it 's develop- ment is a very public issue. It is, at times, a very con- troversial issue as well. Public motivations to remedy perceived "injustices" can confuse- - the resolve to gain long-term energy savings. Examples of is- sues that have and will swirl around energy self-sufficiency and, possibly, "side track" it at times are bagasse generated electrical energy . pricing at "fuel . avoided costing, " cost ef- ficiency of utility operations, regulated utility administra- tion versus municipally administered electric company , and raising municipal revenues through energy taxes from off-island sales. An accumulation of grievances against the current energy system and it 's prices can cause an -unwarranted backlash against those wanting to bring natural energy supplies on-line. Some of that , . is currently happening. Bagasse generation is being paid a new rate that is closer to "fully avoided costs" of burning oil. That generation is being depicted as the cause of an unwarranted upward adjustment in electrical rates, rather than showing the cost impact of burning oil instead. Further, no reference is made to the value of retaining the dollars within our economy , • rather than exporting it out of our island economy . Part of the retained funds is cycled through the sugar industry , a major employer in Hawaii. In summary, I believe the good progress that Hawaii County has made in becoming energy self-sufficient has been aided by County programs in concert with State and Federal efforts. A small agency directing a well devised program is needed to continue the momentum which has already been gained in becoming energy inde- pendent . The termination of the energy self-sufficiency program budget ended the County ' s interest in this area and it ' s momen- tum is currently being lost . There must be a continuing reliance on the private sector ( indi- viduals, community groups and commercial interests) to gain the most rapid innovation in new energy supplies . That support and encouragement needs to be clearly and loudly pronounced by the • County Council to dispel any belief that there is going to be a County "take-over" of private efforts in alternative energy devel- opment.. • • • • L L . • • • �. 3 . 411 .. • July 31, 1981 , Page 5 There is a clear need for the County to investigate and make public it 's findings for the community to understand current energy issues. The County must also take a formal adversary position where necessary in regulatory proceedings to express the community ' s interest prior to the decision . This informa- tional role is - a very . necessary function of political leader- ship. . In' closing, may I again express my appreciation for being al- lowed this means ofexpressing my opinion on the bill, before you and the issues it has raised for your Council . I hope these thoughts can be of some assistance in your deliberations . Sit - = y yours, • Iri_le,f,t_c `- -C.g .. . . . . Joh, b . Keppeler, I , nc. � - • JPK/dg . r . ti . 1111 III HAI cp1111.IIU,'I/IJII ••� `` M•�•a , COUNTY COUNCIL County of Hawaii Hawaii County BuiLling Hilo, Hawaii 96720 August 7 , 1981 • Mr. Stephen K. Yamashiro, Chairman Hawaii County Council County of Hawaii Hilo, Hawaii 96720 Thank you for requesting for input from Council members for - your draft ordinance relating to a County Energy Agency. This • proposal charts new directions for our County Council and certainly deserves serious consideration. The idea of such an Agency has such far-reaching effects that I hope that we will give our. people ample opportunity to react and give input before we make any final decisions for action. • It was to be expected that HELCO would react unfavorably. • However, the objections raised in their communications are valid and should be considered . My own reactions are : • 1. The proposal is too vague. Shouldn ' t we identify the sources of energy we are concerned with, geothermal , biomass , wind, ocean , solar? • 2. The idea of our County Council acting as the Energy Agency smacks of political overtones and extension of the " spoils system" . Are we just creating another . Council political appointee , not subject to civil service , which in fact means an appointee of the Council Chairman? Present practice would indicate this . To date , none of the Legislative Aides have been submitted to the full Council for approval . L • COUNTY COUNCIL ® • r. t, of Itau.ni Ilauau Co141uy 131411.6.4 Hilo. Hainan 96720 Mr. Stephen K. Yamashiro Page 2 August 7, 1981 3.: Will we, in this Agency , dig geothermal wells, pellitize bagasse , develop tree farms , dispense photo voltaic cells or solar panels? 4 . Sec. 3 . 03 . Powers of the County Energy Agency gives the Agency the power to " (2) Appropriate moneys of the County to carry out the purposes of this section. " and " (4) Acquire necessary land by dedication, lease, purchase , exchange or eminent domain. " .How much money are we talking about and for. what ,kind of energy? • How much land and for what purposes? Surely, the $30 , 000 we have on hand is not going to be but a drop in the bucket for the carrying out of this section. Where is all this money going to come from? Would we really have • the- power of "eminent domain" for these vague purposes? What about the State ' s claim of the geothermal resources? • 5. I.f there is to be an Agency, I believe that it should be an independent commission . Perhaps, some members could be appointed by the Council, some by the Mayor and some representing the public. Or perhaps , they could be elected for that specific purpose. 6 . Private enterprise is undertaking solar energy, wind energy , biomass and geothermal . Risk capital is available and should be encouraged. We have enough needs to give services to our people that they cannot provide for themselves , police, fire , road • maintenance , parks , etc . , and not enough money to do this job adequately . Where will the money come from for risk capital? I doubt that we can count on many more Federal or State handouts and if we can , they can • COUNTY COUNCIL County of !Wan "Hawaii County Bang Hilo, Hawaii 96720 Mr. Stephen K. Yamashiro Page 3 August 7, 1981 be used in the same manner as presently , with cooperation of all agencies , such as worked for the Hawaii Geothermal Development Project in Puna. • 7. It is premature to set up such an Agency . If the main purpose is to get some extra benefit for our County from geothermal energy exported by cable to Honolulu, we don ' t even know if sucha project is technically feasible and we should wait for the study to be finished. Even after that, there will be plenty of time to act because of the tremendous amount of money it will take. • 8. We should give serious study to our energy progress and needs , I agree, but this should be done by doing the necessary research on - our needs . Hopefully, we could use our Legislative Auditor ' s office to research the problem and give us a report as to how other jurisdictions have tackled the problem and a study of different systems that do work that are now in effect. / Helene H. Hale COUNCILWOMAN cc: Council Members