PUC Denies HELCO's Biodiesel Supply Contract with Aina Koa Pono-Ka'u LLC

On September 29, 2011, the Hawaii Public Utilities Commission (PUC) issued an order denying Hawaiian Electric Company's (HECO) application, to approve Hawaii Electric Light Company's (HELCO) Biodiesel Supply Contract with Aina Koa Pono-Ka'u LLC (AKP).

The proposal would have provided approximately sixteen million net US gallons annually of locally-produced biodiesel over twenty years. AKP's proposed Big Island project would have consisted of (1) the construction of a biorefinery for the production of biofuel; and (2) the planting, cultivation, and harvesting of the agricultural feedstock that will be refined in AKP's facility to produce the biofuel. The agricultural feedstock would have been grown on currently fallow sugar cane land previously owned by C. Brewer & Co. AKP planned to grow perennial grasses such as sterile napier grasses as well as eucalyptus for their feedstock.

A Variety of Napier Grass
Source: http://www.botany.hawaii.edu/faculty/carr/po.htm

According to HECO's application,

In sum, this Biodiesel Supply Contract is an integral part of the Companies' plans to, including without limitation, (1) continue its strategy to meet the [Renewable Portfolio Standards ("RPS")] requirements that fifteen percent (15%) of the Companies net electricity sales must come from renewable resources by December 31, 2015, twenty-five percent (25%) of [the Companies'] net electric sales come from renewable energy by December 31, 2020, and forty percent (40%) of [the Companies'] net electric sales come from renewable energy by December 31, 2030, (2) further help create energy independence and energy security, (3) use locally grown feedstock for biofuel produced in Hawai'i to help meet the RPS requirement and support the State's goal of diversifying Hawai'i's economy by encouraging the development of local agriculture, (4) reinforce Hawai'i as a showcase for renewable energy, and (5) help preserve Hawai'i's green landscape for future generations.

In denying HECO's application, the PUC found and concluded that the "contract price for the AKP-produced biofuel is excessive, not cost-effective, and thus, is unreasonable and inconsistent with the public interest." The PUC noted that "from a real world, bill-paying perspective, the HECO Companies seek the commission's approval to consistently charge affected ratepayers a premium for HELCO's purchase and use of AKP-produced biofuel under the terms of the twenty-year contract," and that approving the contract would, "displace or curtail existing cheaper renewable alternatives."

A copy of the Decision and Order can be downloaded at http://dms.puc.hawaii.gov/dms/DocumentViewer?pid=A1001001A11I29B53024D28344.