Hawaii PUC rejects changes in the power deal for state’s lone coal plant

Finding it to be inconsistent with the state’s goal of increasing renewable energy output, the Hawaii Public Utilities Commission on Jan. 4 rejected Hawaiian Electric Co. Inc.‘s (HECO) request to amend its power purchase agreement (PPA) with AES Hawaii Inc., which covers the output from Hawaii’s only coal-fired power plant.

HECO is a public utility engaged in the production, purchase, transmission, distribution, and sale of electricity on the island of Oahu. In its January 2016 application, HECO requested that the commission approve an amendment (“Amendment Three”) to an existing PPA from 1988 between HECO and AES. 

The existing PPA currently provides for the sale by AES and purchase by HECO of 180 MW of capacity and associated electric energy from a coal-fired cogeneration facility located at Barbers Point, Ewa District, Oahu, owned and operated by AES. HECO requested that the commission approve Amendment Three, asserting that it: is consistent with the commission’s inclinations and HECO’s Power Supply Improvement Plan; will increase the reliable supply of electricity to HECO’s customers; and is in the public interest.

The existing PPA provides for a 30-year term, which expires on Sept. 1, 2022. AES and HECO negotiated Amendment Three pursuant to the dispute resolution provisions of the existing PPA. Amendment Three would have made changes to the existing PPA, including but not limited to:

  • allowing HECO to purchase from AES up to an additional 9 MW of firm capacity and the associated energy;
  • allowing AES to earn a reliability bonus of up to $1,000,000 for each contract year;
  • modifying certain power plant operating conditions at the facility to allow AES to provide additional capacity and energy;
  • reducing the coal supply inventory AES must maintain;
  • reducing the magnitude of a contingency event that could lead to underfrequency load shedding from a maximum of 200 MW to 189 MW;
  • allowing AES and HECO to partner for the purposes of compliance with Greenhouse Gas Emissions Caps; and
  • permitting AES to reduce its coal combustion by modifying its fuel consumption to include biomass.

But the commission found that Amendment Three is inconsistent with a state law that requires an increasing percentage of electricity to be generated from renewable energy sources, as well as inconsistent with commission guidance regarding the need for new renewable energy projects to lower system costs and maximize the use of cost-effective renewable resources.

HECO addressed the effect of the facility on integrating more renewable generation, saying that the additional 9 MW from the facility will neither increase nor decrease the amount of renewable generation that can be added to the grid.

The commission noted in the Jan. 4 decision: “Although Amendment Three would authorize AES to reduce coal combustion by modifying its fuel consumption to include biomass, HECO has acknowledged that biomass is currently cost-prohibitive for customers. Consequently, fossil fuel will likely continue to provide the additional energy pursuant to Amendment Three. According to HECO, Amendment Three could result in an increase of carbon dioxide emissions by ‘approximately 71,344 tons over the 2017-2022 PPA term.’ The commission considers Amendment Three’s potential to significantly increase greenhouse gas emissions to undermine the claims regarding its reasonableness.”

AES Hawaii is a unit of AES Corp. (NYSE: AES).

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.