37857 - dms.puc.hawaii.gov
77
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF HAWAII In the Matter of DOCKET NO. 2020-0090 37857 DECISION AND ORDER NO. in Recovery) ) ) ) ) HAWAIIAN ELECTRIC COMPANY, INC. ) HAWAII ELECTRIC LIGHT COMPANY, INC. ) MAUI ELECTRIC COMPANY, LIMITED ) dba Hawaiian Electric ) ) For Approval of a First TVmendment to) Petroleum Fuel Supply Contract with) Par Hawaii Refining, LLC, imported) fuel by the Companies, and cost) savings opportunities and to include) the Associated Costs in the) Companies' Energy Cost Clause.
Transcript of 37857 - dms.puc.hawaii.gov
BEFORE THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF HAWAII
In the Matter of
DOCKET NO. 2020-0090
37857DECISION AND ORDER NO.
inRecovery)
))
) )
HAWAIIAN ELECTRIC COMPANY, INC. )HAWAII ELECTRIC LIGHT COMPANY, INC. ) MAUI ELECTRIC COMPANY, LIMITED )dba Hawaiian Electric )
) For Approval of a First TVmendment to) Petroleum Fuel Supply Contract with) Par Hawaii Refining, LLC, imported) fuel by the Companies, and cost) savings opportunities and to include) the Associated Costs in the) Companies' Energy Cost Clause.
TABLE OF CONTENTS
2I. BACKGROUNDRelevant Procedural History 2A.1 . Phase 1 52 . Phase 2 9The First TVmendment 11B.1 . Contracting Parties 112 . The Original Fuel Supply Contract 12
3.13
4 . First TVmendment Terms 155. Incremental Cost of the First TVmendment 17
PARTIES AND POSITIONS FOR PHASE 2 2111.The Consumer Advocate 22A.1 . Phase 2 1 22SOI No.2 . Phase 2 2 24SOI No.3. Phase 2 3 27SOI No.
28B. LOL1. Phase 2 1 28SOI No.2 . Phase 2 2 31SOI No.3. Phase 2 3 32SOI No.
33C. SEO1 . Phase 2 SOI No. 1 332 . Phase 2 SOI No. 2 363. Phase 2 SOI No. 3 36Hawaiian Electric's Reply 39D.
42111. DISCUSSIONApplicable Law 42A.Discussion of Phase 2 SOls 45B.1. Phase 2 SOI No. 1 452 . Phase 2 SOI No. 2 49
i
Par's Request to TVmendthe Original Fuel Supply Contract
3. Phase 2 SOI No. 3 52i.
54
59Public Trust Considerations 64C.Conditions of Approval 65D.
71IV. ORDERS
ii
Summary and Findingsof the GHG Analysis ..............
ii. Consideration of Hidden Long-TermCosts of Reliance on Fossil Fuels
BEFORE THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF HAWAII
In the Matter of
DOCKET NO. 2020-0090
DECISION AND ORDER NO. 37857
DECISION AND ORDER
the State of Hawaii Public
Utilities Commission ("Commission")
conditions: (1) the amended petroleum fuel supply contract
LIGHTare HAWAIIAN ELECTRIC
COMPANY, INC., AND MAUIHAWAII COMPANY, LIMITED, the "Company"),("Consumer
COMPANY,ELECTRIC
orCONSUMER ADVOCACY
pursuant
^The Parties in this DocketINC., HAWAII ELECTRIC LIGHT COMPANY, INC.,
dba Hawaiian Electric ("Hawaiian Electric" the DIVISION OF
Advocate"), an ex officio party, pursuant toHawaii Revised Statutes ("HRS") § 269-51 and Hawaii Administrative
In addition, the Commission has ("LOL") as an Intervenor and the
as a Participant pursuant to 2020 ("Order No. 37203").
By this Decision and Order,
) )
HAWAIIAN ELECTRIC COMPANY, INC. )HAWAII ELECTRIC LIGHT COMPANY, INC. ) MAUI ELECTRIC COMPANY, LIMITED )dba Hawaiian Electric )
) For Approval of a First TVmendment to) Petroleum Fuel Supply Contract with) Par Hawaii Refining, LLC, imported) fuel by the Companies, and cost) savings opportunities and to include) the Associated Costs in the) Companies' Energy Cost Recovery) Clause. )
)
Rules ("HAR") § 16-601-62(a).admitted LIFE OF THE LAND i HAWAII STATE ENERGY OFFICE ("SEO") Order No. 37203, filed on July 7,
approves, subject to certain
("First Amendment") between PAR HAWAII REFINING, LLC ("Par") and
Hawaiian Electric; and (2) approves Hawaiian Electric's request to
purchase low sulfur fuel oil ("LSFO") at the prices determined
under the First Amendment and to recover such costs associated
with the First Amendment through Hawaiian Electric's Energy Cost
Recovery Clause ("ECRC"), to the extent that the costs are not
recovered in base rates.
I.
BACKGROUND
A.
Relevant Procedural History
On June 9, 2020, Hawaiian Electric filed an application
requesting in its "requested relief" section that the Commission
issue a Decision and Order: (1) approving the First Amendment;
(2) approving the inclusion of of the First Amendment,costs
imported fuel. and cost savings opportunities, including without
limitation. the costs of fuel. terminalling and handling tees,
throughput fees, and transportation. otherstorage costs,
and related and fees in Hawaiian Electric'staxes ECRC;
and (3) granting Hawaiian Electric such other and further relief
2020-0090 2
2as may be just and equitable. Hawaiian Electric requested that
the Commission issue final decision and order approving thea
2020.3First Amendment no later than August 4,
Alternatively, Hawaiian Electric requested that the
Commission issue an interim order no later than August 4, 2020,
that would:
LOL filed its Motion to Intervene.On June 12, 2020,
5"
2020-0090 3
-"Hawaiian Electric Company,Company, Inc.,Verification; and Exhibits("Application"), at 17-18.
Inc. ,and Maui Electric Company, and Exhibits A-F,"
that theand (3)recovery
(2) allowthe prices
Life of the Land’s Motion to Intervene; Exhibit 1: Par Refineries 2019 Greenhouse Gas Reduction Plans; Verification of Henry Q Curtis; and Certificate of Service," filed on June 12, 2020 ("LOL's Motion to Intervene"). LOL^s Motion to Intervene contained an Exhibit 1: "Par Hawaii Refining Greenhouse Gas Reduction Plan" that was submitted to the Hawaii Department of Health on September 27, 2019 ("Par’s Revised GHG Reduction Plan").
(1) [Ajpprove the First Amendment;Hawaiian Electric to purchase LSFO at determined under the First Amendment and to recover such costs associated with the First Amsendmsent through Hawaiian Electric's ECRC to the extent
costs are not recovered in base rates; not subject Hawaiian Electric's cost for fuel purchased during the period
following interim approval until a final Commission decision and order in this docket to retroactive cost disallowance or adjustment.^
Hawaii Electric Light Limited's Application;
filed on June 9, 2020
On June 23, 2020, the Commission held a status conference
("Status Conference")
related to HRS § 269-6 raised by the Application; the proposed
docket timeline; and.
fuel supply security in its Application.^
On June 29, 2020,
During the initial course of this proceeding, it became
clear to the Commission and the Parties and Participant that the
requested Commission decision date of August 4, 2020, was too short
of a timeframe to sufficiently develop and review the record for
decision and The Commission, therefore.
2020
2020
2020.
2020-0090 4
a final
Motion to Participate of Service," filed on
^Order No. 37182, "Notice of Status Conference," filed on June 19, 2020 ("Order No. 37182"), at 1-2. A recording of the Status Conference is available at: https://youtu.be/E-n9HEHMLnQ.
order.®
■^"The Hawaii State Energy Office's Without Intervention; and Certificate June 29, 2020.
SEO filed its Motion to Participate.”^
^See Order No. 37182 at 8 (one of the agenda items the Commission established for the Status Conference was a discussion of the feasibility of the proposed timeline for this docket, given Hawaiian Electric's requested August 4, 2020 Commissiondecision date). During the Status Conference, the possibility of an interim decision and order by the requested August 4, decision date was discussed. Subsequently, Hawaiian Electric, the Consumer Advocate, LOL, and SEO proposed a stipulated procedural schedule and Statement of Issues "for development of an Interim Decision and Order by the Commission" by August 4,See Joint Letter From: H. Curtis, Consumer Advocate,J. Abraham, and G. Kinkley To: Commission Re: Docket No. 2020-0090 - Hawaiian Electric Companies; For Approval of a First Amendment to Fuel Supply Contract with Par Hawaii; Proposed Issues and Deadline Dates, filed on July 9, 2020, at 1 ("Joint Letter").
to determine with more clarity: the issues
Hawaiian Electric's statements regarding
instructed the Parties and Participant to focus on developing the
record in anticipation of interim decision and order byan
August 4, 2020 ("Phase 1"), with the understanding that the Parties
and Participant would have time to fully address all identified
issues in the next phase of the proceeding, leading up to a final
decision and order ("Phase 2") . ® The procedural histories of
Phase 1 and Phase 2 are summarized below.
1.
Phase 1
On July 1, 2020, the Commission issued Order No. 37203
granting LOL's Motion to Intervene and SEO's Motion to Participate,
and Participant to
procedural order and a joint stipulation of the elements for a
10greenhouse gas ("GHG") analysis.
On July 9, 2020, the Parties and Participant filed their
procedural schedule for Phase 1.
On July 10, 2020, the Parties and Participant filed a
joint letter containing stipulated elements of a GHG analysis
®See Order No. 37203 at 24-25.
i^Order No. 37203 at 26.
2020-0090 5
Joint Letter that contained a proposed statement of issues and
and ordering the Parties file a proposed
Hawaiian Electric intended to submit for the Commission to consider
On July 10, 2020, Hawaiian Electric filed a letter that
On July 10, 2020, the Commission filed a procedural order
for Phase 1, accepting the Parties' proposed procedural schedule,
establishing a Statement of Issues ("SOI"), and setting the scope
On July 13, 2020, the Consumer Advocate, and LOLSEO,
37210, filed 10, 2020No. Juneon
14"
2020-0090 6
No.FirstSubmissionProceeding,
Procedural Order("Procedural Order").
^-'-Joint Letter from: H. Curtis, Consumer Advocate, J. Abraham, and G. Kinkley To: Commission Re: Docket No. 2020-0090 - Hawaiian Electric Companies For Approval of a First Amendment to Fuel Supply Contract with Par Hawaii Stipulated Elements of a Greenhouse Gas Analysis, filed on July 10, 2020.
submitted their respective Information Requests ("IRs").^^
in issuing an interim decision and order.
of participation for SEO.^^
•’•^Letter From: K. Katsura To:2020-0090 - Hawaiian Electric Companies;
Amendment to Fuel Supply Contractof Greenhouse Gas Report forfiled on July 10, 2020 ("GHG Analysis").
Commission Re: DocketFor Approval of a with Par Hawaii;Interim Phase of
Division of Consumer Advocacy's Submission of Information Requests," filed on July 13, 2020 ("CA-IR- "); "The Hawaii State Energy Office's Information Requests to the Companies; and Certificate of Service," filed on July 13, 2020 ("SEO-IR- "); "Life of the Land's Information Requests; and Certificate of Service," filed on July 13, 2020 ("LOL-IR- ").
contained its GHG analysis.
On July 17, 2020, Hawaiian Electric submitted responses
to the respective IRs submitted by the Consumer Advocate, SEO,
and LOLJS
On July 21, 2020, the Consumer Advocate, and LOLSEO,
filed their respective Statements of Position ("SOP") for Phase 1
On July 22, 2020, Hawaiian Electric submitted a letter
stating that it will be filing reply thenot toa
Consumer Advocate's. SEO's. and LOL's respective SOPs for Phase 1
16"
2020-0090 7
Requests,Letter
onK.
No.First
^■^Letter2020-0090
Re: E)ocketFor Approval of a with Par Hawaii;
Division of Consumer Advocacy's Statement of Position," filed on July 21, 2020; "The Hawaii State Energy Office's Statement of Position for Phase 1; and. Certificate of Service," filed on July 21, 2020; "Life of the Land's Phase 1 Statement of Position; and. Certificate of Service," filed on July 21, 2020.
of this proceeding.
of this proceeding .
^-Letter From: K. Katsura To:No. 2020-0090- Hawaiian Electric Companies;First Amendment to Fuel Supply Contract with Par Responses to Consumer xAdvocate ’ s Information Requests, July 17, 2020 ("Response to CA-IR- "); Letter From: K.To: Commission Re: Docket No. 2020-0090 - HawaiianCompanies; For Approval of a First Amendment to Fuel Supply Contract with Par Hawaii; Response to the Hawaii State Office's Information Requests, filed on July 17, 2020 ("Response to SEO-IR- "); Letter From: K. Katsura To: Commission Re: Docket No. 2020-0090 - Hawaiian Electric Companies; For Approval of a First Amendment to Fuel Supply Contract with Par Hawaii; Responses to Life of the Land's Information Requests, filed on July 17, 2020 ("Response to LOL-IR- ").
Commission Re: DocketFor Approval of a with Par Hawaii;
filed onKatsuraElectric
Katsura To: CommissionElectric Companies;
Supply Contract
From: K.Hawaiian
Amendment to Fuel
4, 2020, the Cornrnission issuedOn August
Interim Decision and Order 37256, which: (1) approved.No.
interim basis. the First Amsendmsent; (2) grantedon an
Hawaiian Electric's request to include payments to be incurred by
Hawaiian Electric under the First Amendment to Hawaiian Electric's
the that such recovered inECRC to extent costs notare
Hawaiian Electric's base rates; (3) allowed the First Amendment
rates to be effective as of July 15, 2020; and (4) affirmed that
during the period tollowing interim approval until finala
Commission decision and order in this docket, the Commission would
not subject Hawaiian Electric's cost recovery for fuel purchased
18to retroactive cost disallowance or adjustment.
Reply of Position, filedStatement on
on
2020-0090 8
^^InterimAugust 4,
Hawaiian ElectricJuly 22, 2020.
Decision and Order No. 37256, filed2020 ("Interim Decision and Order"), at 36-37.
2 .
Phase 2
On July 17, 2020, LOL filed its proposed procedural order
for Phase 2 The Consumer Advocate, and Hawaiian ElectricSEO,
On October 8, 2020, the Commission issued a procedural
order accepting the Phase 2 procedural schedule jointly proposed
by the Advocate, and Hawaiian Electric,Consumer SEO,
with modifications. In so doing. the Commission established the
following statement of issues ("SOIs") for Phase 2:^1
1.
21" 2020 ("Phase 2
2020-0090 9
Procedural Order,"Procedural Order").
publicCommissionthe costs
andwithout
interest,shouldof the
Cost
J. Abraham, G. Kinkley, and Consumer Advocate Proposed Issues and Deadline Dates, filed on
-’’Letter From:To: Commission Re: July 17, 2020.
also filed a joint proposed procedural order for Phase 2.-’’
Whether the First Amendment is reasonable and consistent with theincluding whether theapprove the inclusion ofFirst Amendirient, Imsported FuelSavings Opportunities, includinglimitation, the costs of fuel, terminalling and handling fees, throughput fees, storage and transportation, other costs, and related taxes and fees for inclusion in the Company's [ECRC] , to the extent that the costs are not recovered in the Companies' respective base rates, pursuant to HAR § 6-60-6;
filed on October
’•^"Life of the Land's Phase 2 Proposed Procedural Order and Certificate of Service," filed on July 17, 2020.
2 .
3.
Pursuant to the Phase 2 Procedural Order, the Parties
22and Participant exchanged supplemental IRs ("SIRs").
On January 15, 2021, the Consumer Advocate filed its
Supplemental for Phase 2 of this proceeding, andSOP on
19, 2021, and filed their respectiveJanuary LOL SEO
23Supplemental SOPs for Phase 2 of this proceeding.
-^See Phase 2 Procedural Order.second
zz
zz
ft
ft
The PUC's IRs are referred to as "PUC-HECO-IR /f
10
SIRS and its zz
(a)(b)(c)(d)
Pursuant to HRS § 269-6 (b), the effect of the State's reliance on fossil fuels on:
Price volatility;Export of funds for fuel imports;Fuel supply reliability risk; andGreenhouse gas emissions.
Whether Hawaiian Electric is pursuing all reasonable measures to mitigate the higher fuel costs expected under the First Amendment; and
" "Responseto
Hawaiian Electric's responsesLOL's, SEO's SIRS and SSIRs,to as "Response to CA-SIRto LOL_SSIR- ", "ResponseSEO-SSIR-
-^"Division of Consumer Advocacy's Supplemental Statement of Position," filed on January 15, 2021 ("CA's Supplemental SOP"); "Life of the Land's Statement of Position Phase-2 re HECO-PAR FSA; and Certificate of Service," filed on January 19, 2021 ("LOL's
Collectively, the Consumer Advocate's ; supplemental SIRs are referred to as "CA-SIR-
Collectively, LOL's SIRs are referred to as LOL-SIR- and its second supplemsental SIRs are referred to as "LOL-SSIR
Collectively, SEO's SIRs are referred to as "SEO-SIR- and its second supplemental SIRs are referred to as "SEO-SSIR
to the Consumer Advocate's, as well as the PUC's IRs are referred
", "Response to LOL_SIR-LOL SSIR- ", "Response to SEO-SIR- ," "Response
", and "Response to PUC-HECO-IR ," respectively.
On February 8, 2021, Hawaiian Electric filed its reply
B.
The First Amendment
1.
Contracting Parties
Hawaiian Electric is comprised of HECO, HELCO, and MECO.
HECO is a corporation which operates as a public utility engaged
distribution and sale
of electricity on the Island of Oahu. HELCO is a corporation which
operates as a public utility engaged in the production, purchase.
transmission. distribution and sale of theon
Island of Hawaii. MECO is a corporation which operates as a public
engaged in the production. purchase, transmission,
distribution, on the Islands of Maui,
"The
Inc. ,
2020-0090 11
Phase 2filed
^^"HawaiianInc. ,
Energy Officersof Service," tiled on SOP") . Collectively,
Supplemental SOP, and SEO^ s the "Supplemental SOPs").
Hawaii Electric LightLight Company, Limited's
Position; Exhibit A;
Hawaii Stateand Certificate
Supplemental LOL's
Supplemental SOP");Statement of Position;January 19, 2021 ("SEO'sthe CA's Supplemental SOP,Supplemental SOP are referred to as
Electric Company,Company, Inc., and Maui Electric Light Company,Supplemental Reply Statement of Position; Exhibitand Certificate of Service," filed on February 8, 2021 ("Reply to Supplemental SOPs").
Molokai, and Lanai.
to the Supplemental SOPs.-^
in the production, purchase, transmission.
limited liability corporation that:Par
(1) owns and operates an Oahu-based refinery; and (2) is a supplier
of LSFO, high sulfur fuel oil ("HSFO"), 2 diesel ("Diesel"),No.
and ultra-low sulfur diesel ("ULSD"), with delivery and
25transportation capabilities.
2 .
The Original Fuel Supply Contract
In Docket No. 2018-0413, the Coramission approved a fuel
supply contract for petroleum fuels between Hawaiian Electric and
dated January 21,Par,
The Original Fuel Supply Contract governs Hawaiian Electric's
purchase of LSFO, HSFO,
The Original Fuel Supply short-termContract was a
ending December 31, 2022 ("Original Term"),contract on
but contains "Evergreen Provision" which extends thean
Original Terra "to successive one-year extensions, beginning each
on
36280 at 1-2; see also, Response to
-"Decision and Order No. 36280 at 3.
2020-0090 12
-^Decision and Order No. CA-IR-11, Attachment A.
Co. ,36280,
36280"), at 3.
is a Hawaii
Inc. ,filed
2018-0413,25, 2019
Docket No.April
Diesel, and ULSD from Par.^'
2019 ("Original Fuel Supply Contract")
^^In re Hawaiian Elec. Decision and Order No. ("Decision and Order No.
successive January 1, unless terminated by a contracting party
"28upon advanced written notice.
3.
Par's Request to Amend the Original Fuel Supply Contract
April 29, 2020, letterOn Par sent toa
Hawaiian Electric, requesting the Original Fuel Supply Contract be
renegotiated "due di re financial impacts fromto
"29the COVlD-19 pandemic. According the Application,to
Par represented in its letter that:
36280 at 9; see also. Response to
^^Application at 3.
of
2020
Ige has issued2020-0090 13
2®Decision and Order No. CA-lR-11, Attachment A.
2020,Committeeoutbreak a
[] ."
'COVlD-19' ) . Health Regulations
World Health Organization"public health emergency of international concern"Coronavirus Disease 2019 (COVlD-19) Situation Summary," at: https //WWW.cdc.gov/coronavirus/2019-ncov/summary.html.
locationsThe virus
in China and which has now internationally,has been named
David Y. Ige through April
The "COVlD-19 pandemic" refers to the ongoing "outbreak of respiratory disease caused by novel (new) coronavirus that was first detected been detected in more than 100 including in the United States."SARS-CoV-2" and the disease it causes has been named "coronavirus disease 2019" (abbreviated 'COVlD-19'). On January 30, the International Health Regulations Emergency the World Health Organization declared the
health emergency of international
On March 4, 2020 Governor David Y. Ige issued an Emergency Proclamation, in effect through April 29, 2020, intended to prevent, contain, and mitigate the spread of COVlD-19, to provide emergency relief if necessary, and authorize the expenditure of state funds on equipment and supplies as needed. Governor's Emergency Proclamation for COVlD-19, signed on March 4, 2020, available at: https://governor.Hawaii.gov/wp- content/uploads/2Q2Q/Q3/2QQ3Q2Q-GQV-Emergency-Proclamation CQVlD-19.pdf. In total. Governor
Par stated that renegotiation of the LSFO purchase terms
under the Original Fuel Supply Contract is necessary to stop Par's
financial losses, and notified Hawaiian Electric that unless they
^^Application at 3-4.
2020-0090 14
State."COVlD-19
twenty-one Proclamations related to the COVlD-19 Emergency, with the latest Proclamation issued on June 7, 2021, noting that"whereas COVlD-19 continues to endanger the health, safety, and welfare of the people of Hawai'i and a response requires the serious attention, effort, and sacrifice of all people in the State to avert unmanageable strains on our healthcare system and other catastrophic impacts to the State." Governor's Twenty-First Proclamation Related to the COVlD-19 Emergency, signed on June 7, 2021, available at: https://governor.Hawaii.gov/wp-content/uploads/2Q21/Q6/2106080-ATG 21st-Emergency-Proclamation- for-CQVlD-19-distribution-signed.pdf.
Impacts from the pandemic include a decrease in fuel demand resulting in historically low or negative margins on Par products. Specifically, government orders addressing the pandemic have had a significant economic impact on Par under the terms of the Contract, and the continued adherence to the Contract is creating significant financial hardship. ... In December 2018, Par acquired Island Energy Services, LLC's crude unit and ancillary equipment, this second crude unit is referred to as "Par West". The recent events have had a direct impact on Par's sales margin to Hawaiian Electric for the LSFO under the [Original Fuel Supply Contract], which led to the shutdown of Par's crude unit at Par West on March 23, 2020. On March 25’^^, Par announced production reductions and turnaround deferrals. On May 5^*^, Par implemented a furlough of 29 employees in response to the decline in throughput rates at its refineries. Without Par West, Par cannot sustainably locally produce the full volume of LSFO required by the Companies and will have to import barrels of LSFO to meet demand.
came to an amended agreement by June 8, 2020, Par would terminate
31the Original Fuel Supply Contract. Hawaiian Electric began
negotiations with Par "in an attempt to agree
Contract amendment and avoid protracted litigation and potential
fuel supply interruption Hawaiian Electric's and Par's
negotiation resulted in the First Amendment, discussed below.
Hawaiian Electric also issued a Request for Proposal for
4 .
First Amendment Terms
The material terms to the First Amendment are summarized
below (collectively, the "Par Contract" is the Original Fuel Supply
contract as amended by the First Amendment).
1. Pricing: The First Amendment represents a price
increase compared to the prices under the Original Fuel Supply
For all otherContract
^^Application at 5.
2020-0090 15
"32
potential LSFO supply alternatives?^
the procurement of LSFO ("LSFO RFP") on June 5, 2020, to evaluate
on a potential
(specifics under confidential seal).^^
forms of fuel besides LSFO, Par will retain the existing pricing
35under the Original Fuel Supply Contract.
2 . Fuel Quantity: The First Amendment allows
Hawaiian Electric to source Tier 2 volumes from other suppliers.
which allows Hawaiian Electric the market and taketo test
advantage of potential oversupply situations where the pricing of
fuel might allow for savings ("Spot Purchases").cost
this will require a process to allow for recovery of theHowever,
associated fuel costs under the ECRC.
3. Fuel Quality: Under the First Amendment,
instead of allowing for multiple levels of maximum carbon residue
in the LSFO, the maximum carbon residue of all LSFO supplied by
Par will be reduced froms 15.0% to 12.0%.^^
4 . The First Amendment also contains provisiona
stating that if certain conditions including Par'smet (are
decision additional price savings forto Par-West,re-open
Tier 2 volumes would be available Hawaiian Electric,to
including potentially reverting back to the pricing terms of the
38Original Fuel Supply Contract.
2020-0090 16
5.
Incremental Cost of the First Amendment
Hawaiian Electric estimates that the higher prices of
the First Amendment resulted in incremental fuel cost of LSFO of
$57,351,400 for July 15, 2020, through May 2021, which resulted in
$62,944,000requirement of approximately anda revenue a
corresponding residential bill increase of approximately $5.55 per
month for typical 500 kilowatt hour ("kWh")a
Hawaiian Electric turther estimates that the incremental fuel cost
of the First Amendment for LSFO is estimated to be $148,276,500
for the period of July 15, 2020 to December 2022, resulting in a
$162,735,600,requirement of and correspondingrevenue a
residential bill increase of approximately $5.17 per msonth for a
The Commission notes that it provided clear instructions
Hawaiian Electric that the above incremental fuelto cost
estimates should be filed under confidential seal,not
"41unless Hawaiian Electric provided "compellinga reason.
Hawaiian Electric subsequently filed the incremental fuel cost
^“Response to PUC-HECO-IR-104(a).
^’Response to PUC-HECO-IR-104(b).
^ipUC-HECO-IR-104.
2020-0090 17
typical 500 kWh bill.**^
bill. 39
estimates under conf idential seal, where Hawaiian Electric
identified them to be "sales forecasts that have not yet been
publicly disclosed[,]" and/or "[c]onfidential fuel pricing and
//42volume purchase inf oririation .
$57,351,400Regarding the estimate. the Commission
disagrees with Hawaiian Electric^ s claim of confidentiality.
as Hawaiian Electric disclosed
its Application:
effect for the period of April 2019 through March 2020,
pricing under the First Amendment would have been $54.7 million
"4 3higher than under existing Contract pricing. Similar to the
the $57,351,400 estimateestimate submitted in the Application,
uses historical LSFO purchasing data (July 2020 to May 2021) to
estimate the higher costs expected under the First Amsendmsent.
In light of the above. the Commission does not find a compelling
reason to treat this information as confidential.
Regarding the $148,276,500 estimate. the Commission
similarly disagrees with Hawaiian Electric's claim of
confidentiality, as Hawaiian Electric failed to provide a reason
$148,276,500why this estimate results in disclosing sales
^2Response to PUC-HECO-IR-104.
Exhibit E.
2020-0090 18
see also, id.
estimate in "Had the First Amendment been in
a similar incremental fuel cost
forecasts that have not been published or confidential fuel pricing
and volume purchasing information, especially in light of its
explanation on how the estimate was calculated:
is
The Commission notes that the above explanation was not
filed under confidential seal and contains forecasted LSFO
purchasing intormation for 2022. Furthermore, Hawaiian Electric
did not explain how disclosure of the $148,276,500 figure could be
used to derive confidential fuel purchase intormation. As such.
the Commission finds that Hawaiian Electric has failed to
provide compelling for, otherwise sufficientlya reason or
justified, why the $148,276,500 estimate should be filed under
confidential seal.
the Commission observes that calculationsMoreover,
using publicly available information produce similarcan
incremental results. further undermining any justificationcost
for treating this information confidential.as
PUC-HECO-IR-104, Hawaiian Electric provided unredacted billIn
2020-0090 19
2021priceSupply
The purchase volume for the remainder of 2021 is based on the forecasted purchase volume and the purchase volume for 2022 is assumed to be15,385 barrels per day, which is based on the most recent Hawaiian Electric Production Simulation.
The estimated price impact for July 15, through December 2022 is based on the differential between the Original Fuel Contract and the Par First Amendment.
impact estimates for a residential bill increase of approximately
$5.55 per month for a typical 500 kWh bill between the months of
July 2020 and May 2021, and an average residential bill increase
of approximately $5.17 per month for a typical 500 kWh bill between
the months of July 2020 and December 2022.
The Cornrnission notes that the $5.55 and $5.17 per month
estimated increases higher than what Hawaiian Electricare
its Application ($4.52 per monthestimated in increase for a
The Commission also observes that there
is a direct correlation between higher costs incurred due to the
First Amendment and the estimated residential bill
such, using this information, reasonable estimate ofAs a
incremental incurred under the First Amendmentcosts can
be calculated.
Specifically, for the period between July 15, 2020,
and May 31, 2021 (10.5 months), calculations estimate that the
46incremental fuel cost of LSFO to be approximately $59 million,
$5.55* 10.5 months * monthper
2020-0090 20
008,207.96$58,753,318.87.
typical 500 kWh bill)
increases.
^^Under this observation, the Commission notes that in the Application, Hawaiian Electric estimates a residential rate increase of $4.52 per month due to a $54,685,200 incremental increase over a 12-month period. The ratio of this correlation, then, is ($54, 685, 200 per year/$4.52 per month)/ (12 months per year) = 1,008,207.96.
and the period between July 15, 2020, and December 31, 2022
(29.5 months) to be approximately $154 million, which are close in
approximation the incremental fuel estimated into costs
47Hawaiian Electric's response to PUC-HECO-IR-104(a) and (b).
II.
PARTIES AND POSITIONS FOR PHASE 2
and Participant's Phase 2 positions as
reflected through their Supplemental SOPs, are summarized below
and are organized around addressing the Phase 2 SOIs:
1.
respective base
$5.17* 2 9.5 months * monthper
2020-0090 21
: theSavings
the costs of fuel, throughput fees,o ther
inclusion
^^1,008,207.96$153,766,837.02.
costs,in the
Whether the First Amendment is reasonable and consistent with the public interest,including whether the Commission should approve the inclusion of the costs of the First Amendment, Imported Fuel and Cost Savings Opportunities, including without limitation,terminalling and handling fees,storage and transportation,and related taxes and fees forCompany’s [ECRC], to the extent that the costs are not recovered in the Companies’rates, pursuant to HAR § 6-60-6;
2. Whether Hawaiian Electric is pursuing all reasonable measures to mitigate the higher fuel costs expected under the First Amendment; and
The Parties'
the
A.
The Consumer Advocate
1.
Phase 2 SOI No. 1
The Advocate that there stillConsumer states are
remaining concerns and questions regarding the reasonableness of
the First Amendment, as several factors that were cause for concern
Phase 2 . ^8in Phase 1 have not been sufficiently addressed. in
First, the Advocate voices theConsumer concern over
First Amendment's bill impact f noting Hawaiian Electric's
estimates indicate that the bill impact for August through
November 2020, under the Interim Decision and Order, resulted in
an approximately $5.36 per month increase for a typical residential
45customer consuming 500 kWh.
Second, the Consumer Advocate notes that the ECRC has
varied significantly in 2020, and continues to vary froms the time
^^CA's Supplemental SOP at 9.
^^CA's Supplemental SOP at 9-10 (citing Response to CA-SIR-9).
2020-0090 22
(a)(b)(c)(d)
3. Pursuant to HRS § 269-6(b), the effect of State’s reliance on fossil fuels on:
Price volatilityExport of funds for fuel imports; Fuel supply reliability risk; andGreenhouse gas emissions.
the First Amendment went into effect in July 2020 under the
Interim Decision and Order. In light of the above concerns,
the Advocate recommends that certain conditions beConsumer
imsposed to ensure that Hawaiian Electric is proactively seeking to
mitigate the higher fuel costs associated with the First Amendment
(these conditions are discussed in further detail in its discussion
of the Phase 2 SOI No. 2, below).
The Consumer Advocate, however, acknowledges that while
there are existing plans for Hawaiian Electric to decrease its
fossil fuel use, existing fossil fuel generating units remain a
part of the resource mix that provides services to meet energy
needs and service reliability criteria for the
As such, the Consuirier Advocate observes that "the First Amendment
can provide [Hawaiian Electric] a means by which to continue to
for existing thermal generatingLSFOprocure resources as
with the anticipation thatnecessary.
and placed in serviceresources. programs, measures are or
"52implemented, less fossil generation will be used.
SICA'S Supplemental SOP at 13.
SICA'S Supplemental SOP at 10-11.
CA's Supplemental SOP at 11 (footnoted omitted).
2020-0090 23
time being.
52
as new renewable energy
2 .
Phase 2 SOI No. 2
The Advocate reviewed Hawaiian Electric'sConsumer
stated efforts in the record mitigate the higherto costs
expected under the First Amendment and provided comments
and recommendations.
Regarding Hawaiian Electric's observation in its
Application that "if the First Amendment fuel prices were in effect
for June 2020, the electric bill for a 500 kWh Residential customer
would still be approximately $16.79 less than the actual June 2019
"53bill for the same customer due to the decline in fuel prices [,]
the Consumer Advocate states that "this assertion should be ignored
since this assertion is only true because of market conditions and
absent the proposed First Amendment, the average bill would
ft 54be even lower.
Regarding the for Purchases,Spot
the Consumer Advocate that Hawaiian Electricnotes toappears
dismiss this possible alternative "simply because 'there is
currently no mechanism for the Companies to receive cost recovery
for this type of single purchase cargo without approval from the
^^Application at 15-16.
5^CA's Supplemental SOP at 14.
2020-0090 24
the for fuel purchases made through CorrimissionECRC
! /'SSapproved contracts.
The Consumer Advocate states that:
To that end, the Consumer Advocate states that "[s]ingle
purchases or spot market purchases could also be a means by which
to diminish the market power that Par has exerted [,]" and that
"this should be something the Company should be actively exploring,
especially as Hawaii's reliance fossil toon
decrease, that the Company deliver greater value toso can
"57customers at lower prices.
The Consumer Advocate also notes that:
56CA''s Supplemental SOP at 15.
5‘^CA's Supplemental SOP at 15-16.
2020-0090 25
55cA's Supplemental SOP at 16 (quoting Response to CA-IR-5 and Response to CA-SIR-7) .
Besides alternative fuel contracts, the Consumer Advocate sought to determsine whether the
[T]he ECRC continues to be available to the Company and may continue to be a crutch that prevents the Company from looking for ways to decrease the overall cost of service to customers. An example of the crutch and need for greater motivation to reduce costs is evident in this proceeding and the Company needs further encouragement as it relates to reshaping its philosophy to aggressively look for ways to provide quality service while looking for means to deliver that service more cost effectively.
Commission' and that it 'can only receive cost recovery through
fuels continues
recommends that the Cornrnission: (1) require Hawaiian Electric to
further explore the feasibility of single purchase and spot
purchases of LSFO, and to either provide evidence that single
purchase and spot market purchases would never be cost-effective,
provide additional information that would assist theor
development of such measures or to provide additional information
that will assist the development of such measures to deliver lower
well enhance fuel security andcosts to customers as as
reliability; (2) require Hawaiian Electric to provide evidence of
its continued evaluation of whether the run-time of fossil fuel
Supplemental SOP at 16.
2020-0090 26
In light of the above concerns, the Consumer Advocate
Company has evaluated pursuing lowering fuel expense by reducing the amount of fuel consumed. The Company contends, however, that LSFO is the lowest cost fuel and that it continues to operate the system based on economic dispatch but did not provide further details on whether and, if so, how it was pursuing means to mitigate the impact of the anticipated increases that would result from the First Amendment. Other than offering that it supports energy efficiency and that it relies on its existing dispatch software, the Company did not offer any meaningful information on how it will mitigate the anticipated impact of the First Amendment on custoirier bills. . . . Providing more detailed responses identifying measures considered and being pursued to mitigate the fuel costs would provide more assurances about the Company's efforts to mitigate the impact of the First Amendment on its customers.^®
units can be reduced to further minimize the impact of the higher
fuel and (3) require periodic auditscosts; management on
Hawaiian Electric related to fuel procurement and cost recovery to
identify cost savings that could be implemented. for as long as
Hawaiian Electric is able to rely on the ECRC to pass on costs
3.
Phase 2 SOI No. 3
The Consumer Advocate analyzes each of the identified
considerations and conclude that theyto supportseems
approval of the First Amendment. First, regarding GHG emissions,
the Consumer Advocate that Hawaiian Electric filed itsnotes
GHG Analysis during Phase 1, to which the Consumer Advocate states
that " [i]n general, [it] does have recommendednot any
modifications findings inconsistent with the [A]nalysisGHGor
that was filed. Second, regarding the other criteria explicitly
identified in HRS § 269-6 (b), the Consumer Advocate notes:
on
59CA''s Supplemental SOP at 18.
^^CAd s Supplemental SOP at 20.
2020-0090 27
andtransitionincrease
to customers.55
[T]he [Original Term] does not bind the Companies for an extended period of time, provides volume flexibility, and should not impair Hawaii's on-going transition to renewable energy or otherwise increase reliance on fossil fuels.
B.
LOL
1 .
Phase 2 SOI No. 1
LOL based its review of this issue on the following
considerations: enforceability of the First Amendment; fossil fuel
operations; infrastructure; reasonable alternatives;energy
community and publicengagement; trust
Regarding enforceability, LOL states that:
SICA'S Supplemental SOP at 20-21.
^^LOL's Supplemental SOP at 7.
2020-0090 28
marketto
observeshighlights
fuelhavefossil
of theconditions
decrease but the
The Consumerproposed Firstaspects of the volatilitywhere favorableoverall costs to decrease butsupplier imposed price changes that have clawed back some of the potential benefits from customers.
The First Amendment will provide Par with more money that may be used to ensure viability and availability of the facilities used to import fuels used not only to generate electricity but also for marine, aviation, and transportation as opposed to solely relying on spot market purchases.
[Hawaiian Electric] asserted that the underlying contract and the new revision are both binding contracts. Although [Hawaiian Electric] does not believe that Par could demand changes to the underlying contract, when Par did just that, [Hawaiian Electric] caved in rather than litigated, and agreed to the revisions. Nonetheless,
that thedifferentmarket,allowed
fuel
Advocate alsoAmendment
resources.
revisions, cancelsmore or
Regarding fossil fuel operations, LOL quotes a
Hawaiian Electric in whichto SIR LOL statesresponse a
the "describe[s] how hard it is to maintain fossilresponse
"64fuel dependence.
Regarding infrastructure, LOL quotes SIR responses from
Hawaiian Electric, characterizing them "describ[ing] theas
"63difficulties in switching fuel suppliers and how
"66"Hawaiian Electric seeks the financially cheapest fossil fuel.
Regarding reasonable energy alternatives, LOL recommends
that Hawaiian Electric conduct two contingency plans. First,
a fuel-based contingency plan that:
^^LOL^s Supplemental SOP at 8 .
Supplemsental 10 (quotingSOP at Response to
Supplemental 10-11 (quotingSOP at Response to
Supplemental 11 (quotingSOP at Response to
2020-0090 2 9
^^lOL'sSEO-SSIR-6).
[Hawaiian Electric] insists the First Amendment is binding.if Parthe contract?^^
The question thus remains, what happens demands
®^LOL'sSEO-SSIR-5).
®^LOL'sSEO-SSIR-4).
[Cjould include an application to the Commission for the right to buy fuel on the spot market that is below the price paid for fuel under a Commission approved fuel contract. . . . [Hawaiian Electric] could either file for the right in this proceeding or in a separate proceeding. If future spot prices are below the Par price, then it is in the interest
Second., non-fuel-based contingency plan thata
"68"may involve additional renewable energy projects and storage.
Regarding energy storage diversification, LOL discusses
of pumped storage hydroelectric ("PSH"),use
describing it "solv[ing] multiple problemsas
[and] offer[ing] a diversified way of firming up wind and solar
energy in an area that will not be impacted by tsunamis and coastal
"6Sflooding. LOL notes that:
Regarding community engagement, LOL states:
^'LOL's Supplemental SOP at 12.
^^LOL's Supplemental SOP at 12-13.
s9L0L''s Supplemental SOP at 15.
'^LOL's Supplemental SOP at 14.
2020-0090 30
of ratepayers that Hawaiian Electric buys the fuel that costs less.“^
There have been proposals for [PSH] facilities on Hawaii, Maui, Lanai, Molokai, Oahu, and Kauai islands. Parker Ranch on Hawaii Island has 7,000-foot drops that are ideal for PSH. Oahu has several large, dammed reservoirs all of which could provide continuous hydroelectric power to offset intermittent (variable) wind and solar resources.'®
There are development projects that sail through regulatory proceedings because the developer has taken the time and effort to meet with and listen to affected people and communities. There have been several efforts within the community and within dockets such as Integrated Grid Planning, to identify areas that should and should not have specific types of renewable energy facilities.
occurs,
Commission's role in this issue must be developed," and that "[t]he
public trust resources issue is distinct even though it overlaps
with other issues such as [GHG] LOL claims that:
2 .
Phase 2 SOI No. 2
that "Hawaiian Electric has narrowlyLOL states
construed this issue to mean mitigating fuel issues and not the
'iLOL's Supplemental SOP at 15.
^2L0L''s Supplemental SOP at 16.
'^LOL's Supplemental SOP at 18.
2020-0090 31
In this proceeding, the former will not change because of the First Amendment and the latter may be affected by choosing to remain connected to LSFO rather than examining alternatives.
Instead, the utility signs the contract and then either lets the community duke it out with the power producer outside of the Commission's regulatory process and/or opposes community intervention within the Commission's regulatory process. When litigation occurs, the utility caves into developers and fights it out with communities.^^
emissions.
Emissions - including but not limited to [GHGs] - negatively impact public trust resources.
There are two separate components on protecting public trust resources: their use in utility processes and impacts to public trust resources caused by utility processes.
Regarding public trust resources, LOL states that "the
broader issue of alternatives to LSFO."”^^ As such, LOL recommends
75Hawaiian Electric conduct its contingency plans discussed above.
3.
Phase 2 SOI No. 3
LOL states that "excluding changes caused by demand, the
First Amendment will not reduce price volatility, will not result
in lower export of funds for fuel imports, will not decrease supply
risk. and will reduce [GHG]not
LOL further states:
3.
’UOL's Supplemental SOP at 7.
'^LOL's Supplemental SOP at 6.
2020-0090 32
'bee LOL's Supplemental SOP at 7 (stating that "comments on this issue are found later in this document.").
The polar vortex is the persistent, large-scale, upper-level low-pressure area, less than 620 miles in diameter, that rotates counter-clockwise at the
Each day, the globe is one day closer to the climate change tipping point of no return, assuming we haven’t reached it already. It is beyond the realm of reason to be unaware that [GHG] emissions caused primarily by fossil fuel are increasing negative human health impacts, destroying land and water-based ecosystems, causing a massive increase in global extinctions, and that flooding, sea level rise, and drought are causing migration, immigrant-resident confrontations, and wars. The Syrian exodus to Western Europe was largely caused by fighting over control of diminishing resources caused by a decade long climate change-induced drought.
emissions.
c.SEO
1 .
Phase 2 SOI No. 1
The SEO states "that approval of the First Amendment
will likely maintain the status quo and will likely have minimal
impact the public interest in relation statewidetoon
"78 and that "[t]he assumption that the status quoenergy assurance,
is reasonable and consistent with the public interest in relation
"79to statewide energy assurance supports the First Amendment.
The however, thatSEO, states
availability of relevant data and informsation preclude the SEO
from conducting further analyses and reaching more definitive
the impact to statewide energy assurance under
alternative scenarios, such as the potential cessation of retinery
"80operations in the State. To that end, the SEO believes that
■^^LOL's Supplemental SOP at 6.
^^SEO's Supplemental SOP at 6.
^^SEO's Supplemental SOP at 6.
s^SEO^'s Supplemental SOP at 6.2020-0090 33
North Pole and clockwise at the South Pole. The shift in the polar vortex has impacted large areas of the Northern Hemisphere including Hawaii.
conclusions on
"[1]imitations of the
"a comprehensive statewide 'Common Operatingsectorenergy
Picture' [ ("COP") ] is required to determine the degree to which
supply reliability or statewide energy assurance risk would be
impacted by a scenario where the remaining refinery permanently
"81shuts down.
In addition, the SEO examined several potential issues
related to Hawaiian Electric's fuel supply. import logistics.
and distribution logistics in the event that Par ceases refining
82operations in the State:
Hawaiian Electric would need to generatorsource
fuels from off-island supply sources, most likely at
that would be above the pricing of thecosts
First Amendment.
there serious aboutare no concerns
Hawaiian Electric's ability to find and contract for
suitable replacement fuels in the global market.
With the information provided in the record, the SEO
cannot definitively state whether, and to what extent.
there is a change to statewide energy assurance risk
caused by the di rect and indirect impacts of a
siSEO's Supplemental SOP at 7.
^^SEO's Supplemental SOP at 8-14.
2020-0090 34
refinery closure import infrastructureon
ceases operation, Hawaiian Electric will have several
additional alternatives for importing fuel.
there would be a change of energy securityextent,
risk caused by the impact of a potential refinery
closure on statewide fuel distribution.
Based the above, the also recommends thatSEOon
Hawaiian Electric conduct a detailed evaluation of the available
options to maintain fuel supply to its customers in the event Par
cease refinery operations, and that Hawaiian Electrictowere
should provide report of its findings for review thetoa
Commission, Consumer Advocate, and other relevant entitiesSEO,
2020-0090 35
^^SEO^s Supplemental SOP at 12-13 (the SEO also provides a recommended list of options that Hawaiian Electric could evaluate, much of which is under confidential seal).
• If
• The SEO cannot definitively state whether, and to what
serving the public interest.
in the event the refinery
some or all of the existing Par-owned logistic
assets remain available
2 .
Phase 2 SOI No. 2
The SEO believes that "the First Amendment would add
considerable costs to Hawaiian Electric ratepayers compared to the
January 2019 contract pricing; however, if the Par Refinery was
not producing LSFO and it had to be imported the cost to
» 84Hawaiian Electric ratepayers would have been higher.even
such, recommends "that Hawaiian Electric, bestAs SEO as a
practice, should continue the market identityto test to
opportunities for savings, particularly withcost respect
volumes. "85the First Amendment^ s Tier 2 Furthermore,to
"SEO acknowledges Hawaiian Electric's Tier 2 LSFO prices are
comspetitive with what they could obtain in the current
import market.
3.
Phase 2 SOI No. 3
The SEO reviews this section by discussing the four
considerations HRS § 269-6 (b) :
s^SEO's Supplemental 15.SOP at
SSSEO's Supplemental 15.SOP at
s«SEO's Supplemental 15.SOP at
2020-0090 36
identified in
export of funds for fuel imports; fuel supply reliability risk;
and GHG emissions.
Regarding the believes thatSEO
Hawaiian Electric's reliance on petroleum fuels for much of its
power generation inherently leads to exposure to price volatility
the SEO states that this exposure
87will exist whether the First Amendment is approved or not.
Regarding export of funds for fuel purposes, the SEO
states that:
Regarding fuel supply risk, the SEO
recommends that COP be developed to "provide a picture ota
statewide energy assurance factors and could help assess how that
8'SEO's Supplemental SOP at 16.
^^SEO's Supplemental SOP at 17.
2020-0090 37
afuels.fuel
in petroleum markets; however,
Should the refinery close due to adverse market conditions (with or without the First Amendment) , there will be a shift to 100 percent import of finished fuels. SEO believes this shift would increase fuel costs more than under the First Amendment . . . and would thus increase the export of funds from the State. In addition, the portion of current fuel costs currently paid to Par Hawaii refinery employees would be elimsinated (or substantially reduced under a scenario where the Par refinery is converted into an import terminal), further increasing the relative export of funds.
picture is impacted by individual decisions, such as approval of
" 85the First Arnendrnent. The SEO notes that a COP is in contrast
"with the more limited perspective that Hawaiian Electric has
offered in assessing energy security impacts from a narrower
perspective of the individual contract and impacts specific to
"90Hawaiian Electric's operations[,] and that " [a] narrow
perspective that does not consider the interdependencies of the
"91entire energy ecosystem does not meet the intent of the statute.
Regarding emissions, the that itGHG SEO states
"does not anticipate approval of the First Amendment to have a
" S2significant additional impact on [GHG] emissions.
The SEO ultimately does not object to the Commission
approving the First Amendment. discussed above, theAs SEO
recommends that COP be developed and that Hawaiian Electrica
conduct detailed evaluation of the available options anda
contingency plans to maintain fuel supply to its customers if Par
s^SEO's Supplemental 17 .SOP at
®^SEO' s S upp1ernent a1 17-18.SOP at
91SEO's Supplemental 18 .SOP at
S2SEO's Supplemental 18 .SOP at
-SEO's Supplemental 19.SOP at
2020-0090 38
were to cease refinery operations.
D.
Hawaiian Electric's Reply
In response to the concerns about the First Amendment's
"it was the
right choice to come to terras with the only on-island refiner of
"94[LSFO]. Acknowledging that Par has put Hawaiian Electric "in a
difficult position," and that the First Amendment is expected to
increase prices the Original Fuel Supply Contract,over
Hawaiian Electric counters that the First Amendment contains "some
key provisions the Companies were able to negotiate that should
" 95not be overlooked.
"the pricing secured in the First Amendment is cheaper than the
alternative of procuring the fuel through the broader import
limit the future bargaining power of Par, maintain fuel supply
assurance, and provide the Companies with options if market prices
" 9Swere to shift and allow for cheaper fuel to be procured.
-'■^Reply to Supplemental SOPs at 3.
®®Reply to Supplemental SOPs at 4.
2020-0090 3 9
^^Reply to Supplemsental SOPs at 3-4 (these are reflected in the summary of the First Amendment Terms in Section I.B.4).
Further, Hawaiian Electric emphasizes that
anticipated costs, Hawaiian Electric maintains that
market[,]" and that its "Power Supply Fuels Division has been
working diligently on alternatives and msitigation measures to
Additionally,
been working to decrease its fuel costs across multiple dockets.
and that the First Amendment's pricing should be viewed in context
of these comprehensive efforts. Hawaiian Electric also notes that
its Power Supply Fuel Division "was recently recognized in the
Management Audit of the Hawaiian Electric Company (HECQ) Final
Report dated May 12, 2020 [], for having been diligent in seeking
out and securing cost savings over the past decade[,]" and that
they have achieved millions ot dollar in cost savings over a number
Regarding efforts to mitigate higher fuel costs expected
under the First Amendment, Hawaiian Electric states that it i s
pursuing both securing longer-term fuel contracts as contingencies
and exploring single purchase the spotcargoes on
Hawaiian Electric that it is working with a potentialstates
supplier to provide a no-minimum fuel contract that could be used
as a fuel supply contingency (the details of which are filed under
99confidential seal). Further, regarding purchases,spot
Hawaiian Electric states that "an innovative regulatory mechanism
®"See Reply to Supplemental SOPs at 13.
^^Reply to Supplemental SOPs at 4.
-^Reply to Supplemental SOPs at 18-19.
2020-0090 40
market.
of prior dockets.-^
Hawaiian Electric contends that it has
should be established in this proceeding to allow the Companies to
reasonable expenditures single purchaserecover on cargoes,
which would provide reasonable alternative and mitigationa
>t 100measure to the First Amendment pricing.
and LOL's recommendations thatIn to SEOresponse
Hawaiian Electric develop contingency plans in case Par ceases
refinery operations in the State, Hawaiian Electric states that it
is already taking reasonable action and secured "the most
reasonable pricing available this time with theat
First Amendment. Further, Hawaiian Electric reiterated its
actions already underway to explore an alternative non-minimum
fuel contract, as well as its request for an expedited process by
Regarding LOL's "non-fuel based contingency plan
additional renewable and storage,"energy
Hawaiian Electric that while "it appreciates thestates
" 103interest in achiev[ing] Hawaii's energy policy goals,
"[t]he Companies' of is necessarily tiedprocurement LSFO
its of renewable time" andto procurement resources over
^ooReply Supplemsental 16.to SOPs at
^^iReply Supplemental 21.to SOPs at
Supplemental 22 .to SOPs at
^^^Reply Supplemental 22 .to SOPs at
2020-0090 41
^^-Reply
which to approve spot purchases.
Hawaiian Electric "must balance cost considerations with stability
independent renewable power producers to navigate Hawaii toward
//104its clean energy future.
Ill.
DISCUSSION
A.
Applicable Law
In its review of the Application, the Cornrnission first
cites its general powers and duties governing public utilities
105under HRS §§ 269-6(a), 269-6 (b), 269-6(c), and 269-7(a):
§ 269-6 General Powers and duties.
i^^Reply to Supplemental SOPs at 23.
2020-0090 42
ofoperations,
consider.
^'^^The Commission's statutory duties under HRS § 269-6 (b) are further discussed in Section III.B.3, infra.
capital[C]ommission
under this chapter.the reasonablenesssystem capital improvementsthe [C]ommission shall
(a) The [Commission] shall have the general supervision hereinafter set forth over all public utilities, and shall perform the duties and exercise the powers imposed or conferred upon it by this chapter.
(b) The [Commission] shall consider the need to reduce the State’s reliance on fossil fuels through energy efficiency and increased renewable energy generation in exercising its authority and duties
In making determinations of of the costs of utility
andexplicitly
on the grid, among other things, and will continue to work with
(C)
S> 269-7 Investigative powers.
2020-0090 43
In exercising its authority and duties under this chapter, the [Commission] shall consider the costs and benefits of a diverse fossil fuel portfolio and of maximizing the efficiency of all electric utility assets to lower and stabilize the cost of electricity. Nothing in this section shall subvert the obligation of electric utilities to meet the renewable portfolio standards set forth in section 269-92.
quantitatively or qualitatively, the effect of the State’s reliance on fossil fuels on price volatility, export of funds for fuel imports, fuel supply reliability risk, and [GHG] emissions. The [C]ommission may determine that short-term costs or direct costs that are higher than alternatives relying more heavily on fossil fuels are reasonable, considering the impacts resulting from the use of fossil fuels.
(a) The [C]ommission and each [C]ommissioner shall have power to examine into the condition of each public utility, the manner in which it is operated with reference to the safety or accommodation of the public, the safety, working hours, and wages of its employees, the fares and rates charged by it, the value of its physical property, the issuance by it of stocks and bonds, and the disposition of the proceeds thereof, the amount and disposition of its income, and all its financial transactions, its business relations with other persons, companies, or corporations, its compliance with all applicable state and federal laws and with the provisions of its franchise, charter, and articles of association, if any, its classifications, rules, regulations, practices, and service, and all matters of every nature affecting the relations and transactions between it and the public or persons or corporations.
"The broad provisions of HRS § 269-7 (a) in thevest
[C]ommission the authority to examine all transactions that affect
106or may affect the public whom the utility serves.
purchased energy costs may be included in the fuel adjustment
clause unless the contracts or prices for the purchase of such
fuel or energy have been previously approved or filed with the
[C]ommission." To that end, "all fuel supply contracts must be
approved by the [C] ommission in order for the fuel costs to be
included in the public fuel adjustment clause.
The [C]ommission, I s
fuel supply contract is reasonable and consistent with the
//107public interest.
reaching its determination regarding (1) theIn
First Amendment, and (2) Hawaiian Electric's request to purchase
LSFO at the prices determined under the First Amendment and to
recover such costs associated with the First Amendment through
Hawaiian Electric's to the extentECRC
Inc. ,
2020-0090 44
No.2016,
see,Decision
InDecision
Docketfiled on March 24,
Comm.,33602,
2015-0207,at 18.
^Q^In Re CharterDecision and Order No.
i^'HAR § 6-60-6 (2) ; Docket No. 2017-0393,July 26, 2018, at 30-31;Docket No. 2012-0003, June 26, 2012, at 16.
Co., Inc., filed on
Util Coop.,filed on
e.g., In re Hawaiian Elec. and Order No. 35603, re Kauai Island
and Order No. 30466,
Pursuant to § HAR 6-60-6(2), "[n]o changes in fuel and
in turn. examines whether a public
that the costs are not
recovered in base in the instant docket, the Cornrnissionrates
addresses the SOIs identified for Phase 2.
B.
Discussion of Phase 2 SOIs
1.
Phase 2 SOI No. 1.
1 in Phase 2 of this proceeding is:Issue No.
is
After review of the record, the Commission finds and
concludes, subject to conditions described below in Section III.D,
that: (1) the First Amendment is reasonable and consistent with
the public interest; and (2) Hawaiian Electric's request to include
the costs ot the First Amendment ECRC,
to the extent such costs are not recovered in Hawaiian Electric's
base rates, is reasonable and should be approved. In reaching
2020-0090 45
throughput fees,other
inclusioncosts,in the
Whether theconsistentincludinginclusionImportedincluding
in Hawaiian Electric's
First Amendment is reasonable and with the public interest,
whether the Commission should approve the of the costs of the First Amendment,Fuel and Cost Savings Opportunities, without limitation, the costs of fuel,
terminalling and handling fees,storage and transportation,and related taxes and fees forCompany's [ECRC], to the extent that the costs are not recovered in the Companies' respective base rates, pursuant to HAR § 6-60-6.
this decision, the Cornrnis sion concludes and observes
the following:
1. It is clear from the record that if the Commission
does not approve the First Amendment there is a significant risk
that Par will seek to terminate the Original Fuel Supply Contract.
2 . If terminate the Original FuelPar attempts to
Supply Contract, it will most likely cause fuel supply security
issues on Oahu and potentially elsewhere in the State.
3. Based on the record, there does not appear to be
other feasible of readily available that isLSFOany source
equivalent to or cheaper in cost than the proposed Tier 1 prices
under the First Amendment.
4 . Therefore, the Coiriraission believes that denying the
First Amendment msay result in reduced fuel supply security and
potentially increased costs due to litigation and the higher costs
associated with importing Thus, based theseLSFO. on
circumstances. the Commission the First Amendment,approves
subject the conditions described in Section below.to III .D
finding that approval is reasonable and in the public interest.
The Commission, however. finds that the situation
behind the Application is deeply troubling. According to
Hawaiian Electric, Par has represented that:
2020-0090 46
inor
Impacts from the pandemic include a decrease fuel demand resulting in historically low
Due to Par's "financial hardship," "Par contends that it
needs to stop its financial losses as soon as possible due to its
shareholders. "^^5obligations its Par's solution for itsto
was to negotiate with Hawaiian Electric
to amend the Original Fuel Supply Contract under threat that should
Hawaiian Electric not re-negotiate the terras of the Original Fuel
Supply Contract to Par's satisfaction, "it would terminate the
"110[Original Fuel Supply Contract] These circumstances
effectively created a "take or leave it" situation which appears
have affected Hawaiian Electric's bargain ingto power.
thereby limiting its opportunities to protect ratepayers.
that contractual righta or
justifiably terminate the Contract," Hawaiian Electric quickly
reached an agreement with
3.
4 .
4 .
2020-0090 47
financial troubles, then.
negative margins on Par products. Specifically, government orders addressing the pandemic have had a significant economic impact on Par under the terms of the [Original Fuel Supply Contract], and the continued adherence to the [Original Fuel Supply Contract] is creating significant financial hardship.
Equally troubling, while Hawaiian Electric "dispute [s]
Par on the First Amendment and then
Par has to demand renegotiation
sought expedited review by the Commission, requesting a decision
later than August 4, 2020, which less thanwas
two months from the filing of the Application on June 9, 2020 .
Hawaiian Electric's reasoning behind taking the above actions was
"avoid protracted fuel supplyto
interruption that would materially impact and threaten the
Companies' ability continue providing service itsto to to
/'illcustomers[;] however, this does not recognize the associated
strain Participant, and CommissionParty,on
Going forward, to ensure that Hawaiian Electric isresources.
better prepared to address such situations, the Commission shall
impose conditions of approval addressing the Commission's concerns
above. as discussed further in Section III.D.
such, the Commission further concludes and observes:As
5. The Original Fuel Supply Contract does not contain
clear regarding the right demand renegotiation andterms to
termination; and
6. Hawaiian Electric is in a disadvantaged bargaining
relative in due its failureto Par, part. to to
sufficiently develop an alternative LSFO fuel plan. should Par
exit the State.
2020-0090 48
and order no
2 .
Phase 2 SOI No. 2.
2 in Phase 2 of this proceeding is:Issue No.
Whether Hawaiian Electric is pursuing all reasonable measures to
mitigate the higher fuel costs expected under the First Amendment.
"given the timeframe for Phase 1
additional information is needed to make a determination on this
//112issue[,] and instructed the Parties and Participant to develop
the record sufficiently enough to address this issue in Phase 2.
As noted above, Hawaiian Electric estimates that the
$57,351,400
for the period of July 15, 2020, through May 2021, resulting in a
$62,944,000requirement of approximately andrevenue a
corresponding residential bill increase of approximately $5.55 per
month for a typical 500 kilowatt hour ("kWh") bill, and that the
total estimated incremental costs of the First Amendment for LSFO
for the period of July 15, 2020, through December 2022,
$148,276,500,is resulting in requirement ofa revenue
$162,735,600, and a corresponding residential bill increase of
113approximately $5.17 per month for a typical 500 kWh bill.
^^^jnterim Decision and Order at 27.
ii^Response to PUC-HECO-IR-104 (a) and (b) .2020-0090 4 9
In its review of this issue in Phase 1, the Commission found that
incremental cost of the First Amendment for LSFO is
Hawaiian Electric acknowledges the higher prices
expected under the First Amendment, but notes that, due to the
COVID-19 pandemic driving down the demand for fuel. a typical
residential customer's bill (consuming 500 kWh per month) under
the First Amendment in December 2020 was actually less than their
Hawaiian Electric also states that it has "reached out to several
different trading companies regarding their interest in supplying
single cargoes for LSFO for Oahu Fuels. Depending on market
conditions, these import barrels may land at prices below the
"115Tier 2 pricing.
Hawaiian Electric also that it " ablenotes towas
successfully negotiate fuel cost savings in Docket No. 2014-0217,
Docket No. 2015-0064, Docket No. 2016-0054, Docket No. 2017-0393,
and Docket No. 2018-0413 [,]" with annual savings relative to prior
the COVID-19 pandemic driving down the demand for fuel, a typical
residential customer's bill under the First Amendment was actually
ii^Response to PUC-HECO-IR-102.
iiSResponse to PUC-HECO-IR-102.
ii^Response to PUC-HECO-IR-102.
2020-0090 50
contracts totaling $52,452,700.-^^^
Regarding Hawaiian Electric's observation that due to
bill in December 2019 under the Original Fuel Supply Contract.
less than their bill a year before in 2019 under the Original Fuel
Supply Contract prices, the Commission finds this comparison to be
of limited value,
conditions between December 2019 and December 2020, and if those
market conditions were otherwise held equal, the average customer
117bill would be lower under the Original Fuel Supply Contract.
Similarly, the Commission also finds that
assertions regarding cost savings in prior fuel contracts from
other dockets should not be considered in ot this
particular issue, as these purported efforts to reduce fuel costs
are not directly related to the higher costs expected under the
First Amendment.
The Commission agrees with the Consumer Advocate, SEO,
and LOL that more action is needed by Hawaiian Electric to msitigate
the higher fuel costs under the First Amendment, particularly as
it relates to planning for alternative LSFO procurement. As such.
the Commission will require Hawaiian Electric to update its
Fuels Master Plan ("FMP") include. other things,to among
a feasibility analysis of spot market purchasing of LSFO, and a
contingency plan that addresses alternative fuel supplies should
^^•^CA's Supplemental SOP at 14.
2020-0090 51
since it reflects markedly different market
Hawaiian Electric's
its review
Par exit the State. The details of the FMP update are further
discussed in Section III.D, below.
3.
Phase 2 SOI No. 3.
3 in Phase 2 of this proceeding is:Issue No.
ot the
HRS § 269-6 (b) states:
The Commission Hawaiinotes recent Supreme Court
decisions in interpreting the Cornrnission^ s statutory
2020-0090 52
The [Cornrnission] shall consider the need to reduce the State's reliance on fossil fuels through energy efficiency and increased renewable energy generation in exercising its authority and duties under this chapter. In making determinations of the reasonableness of the costs of utility systems capital improvements and operations, the [Cjommission shall explicitly consider, quantitatively or qualitatively, the effect of the State's reliance on fossil fuels on price volatility, export of funds for fuel imports, fuel supply reliability risk, and GHG emissions. The [C]ommission may determine that short-term costs or direct costs that are higher than alternatives relying more heavily on fossil fuels are reasonable, considering the impacts resulting from the use of fossil fuels.
Pursuant to HRS § 269-6 (b), the effectState's reliance on fossil fuels on:
(a) Price volatility;(b) Export of funds for fuel imports;(c) Fuel supply reliability risk; and(d) GHG emissions.
responsibilities applicable under §HRS
the Supreme Court noted that a "primary purpose"In In re: MECQ,
of HRS § 269-6(b) is to "require the [Commission] to consider the
hidden and long-term of reliance fossil fuels fcosts on
which subjects the and its residents ' increased airState to
and 'potentially harmful climate change due to the
z //il9release of harmful greenhouse gases.
In considering "hidden long-term" costs of reliance on
fossil fuels f the found in Hawaii that theCourt In Gasre:
Commission also needs review emission "leakage" byto GHG
emissionsexplicitly considering "out-of-state" GHG
Furthermore, the Court's decision in In re: Hawaii Gas found that
the Commission may not merely restate the representations of a
party, but must make independent factual findings concerning the
emissions of certain projects that "substantiate thoseGHG
Hawaii 147 Hawaii 200-01, 465 P.3dIn Gas atre:
2020-0090 53
i-OSee
at 647-48.
269-6 (b) . lis
147 Hawaii at 200, 465 P.3d at 647(quoting In re: MECQ at 141 Hawaii
®See generally, In re Application of Maui Elec. Co. , 141 Haw. 249, 408 P.3d 1 (2017) ("In re: MECQ"); In the Matter of the Application of the Gas Company, LLC, 147 Hawaii 186, 465 P.3d 663 (2020) ("In re: Hawaii Gas").
re: Hawaii Gas (emphasis in the original)at 263, 408 P.3d at 15) .
findings in a manner that would allow this court to track the steps
"121by which it reached its decision.
Acknowledging the above-discussed legal precedent of
In re:
Consumer Advocate, and LOL, Hawaiian Electric submitted itsSEO,
i.
Summary and Findings of the GHG Analysis
The GHG Analysis:
i-iln 465 P.3d at 649.
2020-0090 54
intendedAmendment' s]
theand
[I]s[First
bothemissions
to capturedirect GHG
^-^See In re Maui Elec. Co., E)ocket No. 2018-0433, Letter From: K. Katsura To: Commission Re: "Docket No. 2018-0433, Power Purchase Agreement between Maui Electric Company, Limited and Paeahu Solar, LLC; Submission of 1) Updated Assumptions Used for Simulation of Maui Electric’s Power System, and 2) Lifecycle Greenhouse Gas Emissions Analysis," filed on September 19, 2019; In re Hawaiian Elec ■ Co. , Docket No. 2019-0050, Letter from K. Katsura To: Commission Re: "Docket No. 2019-0050 - Power Purchase Agreement between Hawaiian Electric and AES West Oahu Solar, LLC; Responses to Commission's Information Requests," filed on July 3, 2019. The GHG Analysis was written by Ramboll US Corporation, a consultancy company that has been hired by Hawaiian Electric to provide GHG emission studies in prior dockets. The GHG Analysis was based on the "best reasonably available public data that has undergone scientific peer-review. Where practicable, this information was then localized to account for unique location-specific factors applicable to projects located in Hawaii (such as significant transportation distances) and supplemented with direct emissions calculated to account for the Project's lifecycle emissions." GHG Analysis at 1.
re: Hawaii Gas 147 Hawaii at 202,
GHG Analysis during Phase 1 of the proceeding.
MECQ and In r:e Hawaii Gas, and in consultation with the
The GHG Analysis provided results for several cases:
Crude (2015-2019), which represents the historical average ofPar
emissions for past (2015-2019) Par crude fossil fuel sources,GHG
and Global (low), Global (high)f and Global (Average),
which represents the range and average of GHG emissions for global
fossil fuels sources.
i-^GHG Analysis at 1.
2020-0090 55
farthestfor theassumes
reasonably foreseeable indirect GHG emissions. The analysis evaluates the potential operational GHG emissions directly attributableconsumption of the [First Amendment's]electricity generation, as well asGHG emissions that may be producedstages in the fuel lifecycle, such(crude oil production). Midstream refining) and Transportation stages. ^^3
to the fuel for indirect
at earlier as Upstream (crude oil
^2‘^gHG Analysis at 1. The "Global (low)" case assumes the lowest country-level upstream carbon intensity in the production stage, the lowest country-level midstream carbon intensity in the refining stage, and no additional leg travel from the U.S. msainland to Hawaii in the transportation stage. The "Global (high)" case assumes the highest country-level upstream carbon intensity for both upstream and midstream (i.e., production and refining) stages, and accounts for an additional leg from the country (based on historical Par data) to Hawaii transportation stage. The "Global (average)" case volume-weighted global averages for both upstream and midstream (i.e., production and refining) stages and conservatively accounts for an additional leg froms the U.S. msainland to Hawaii for the transportation stage. The "Par Crude (2015-2019)" case represents the historical average of GHG emissions for past Par crude fossil fuel sources, based on the 2015-2019 calendar year period, using global production and refining data by crude source location aggregated at the country level. See GHG Analysis at 4.
The table below surnrnarizes the GHG Analysis' findings
for GHG emissions:
103,620 325,618 947,466 330,921
100,951 230,976 334,045 218,082
Transportation 63 93,930 383,084 93,930
2,691,988
2,896,622 3,342,512 4,356,582 3,334,921
The the following observations and
conclusions regarding the GHG Analysis:
1. The Corrimission observes that according theto
GHG Analysis, "due to the proactive way that Par procures fuel.
i^^Data taken from the GHG Analysis.
metric tons of carbon dioxide equivalents
2020-0090 56
Global(average)
Upstream(production)Midstream(refining)
OperationalTotal ProjectLifecycle
i-’MT CO2e/yrper year.
Global(low)
GHG Analysis Summary for LSFO Fuel Under the First Amendment-^Emissions (MT CO2e/yr)i27
Global(high)
Par Crude(2015-2019)
Project Stage^26
^-^See GHG Analysis at 3. ("Upstream (production)" stage includes GHG emissions from crude oil production, processing and transportation. "Midstream (refining)" stage includes GHG emissions from refining the crude oil into LSFO, "Transportation" stage includes GHG emissions from transporting both crude oil and LSFO, and "Operational" stage includes GHG emissions from the use of fuels for electricity generation, and are assumed to equal the direct generation of GHG emissions of Hawaiian Electric's facilities based on actual 2019 fuel consumption. Operational GHG emissions are assumed to be the same for all cases.
Commission makes
the [First Amendment] does not specify crude supply sources or
refinery locations. Par may import crude which is refined to
produce LSFO and other fossil fuels may import refinedor
//128 As such, the Commission finds the GHG Analysis'
conclusion that "the Global (Average) and Par Crude (2015-2019)
representative for the [First Amendment],cases are
given the uncertain tuture of crude supply and refinery
reasonable.location[, ] " be In reaching this finding,to
none of the
expressed dissatisfaction with how the GHG Analysis was conducted
or the recommendations contained within.
2 . such. when comparing the Global (Average)As
CO2e/yr)(3,342,512 and Crude (2015-2019)MT Par
MT CO2e/yr)(3,334,921 the Commission finds thatcases,
the GHG Analysis' conclusion that that the GHG emissions froms the
future fuel supply of LSFO under the First Amendment will likely
fall between the Global (average) and Crude (2015-2019)Par
i28GHG Analysis 1.at
^29gHG Analysis 11.at
^^oqhG Analysis 3.at
2020-0090 57
estimates, to be reasonable .
Parties or Participantsthe Commission notes that
the most
3. While the Commission does thenot expect
First Amendment to directly reduce GHG emissions, there does not
appear to be evidence in the record suggesting GHG emissions will
increase as a result under the First Amendment.
4 . The Commission's observations in the paragraph
above do contradict the Parties' and Participant'snot
observations regarding emissions expected under theGHG
First Amendment. In its supplemental SOP, the Consumer Advocate
stated that it did not have recommended modificationsany or
findings inconsistent with the GHG Analysis that was filed by
Electric.Hawaiian The SEO stated in its supplemental SOP that
it "does anticipate approval of the First Amendment to have anot
132additional impact global emissions.GHGon
While in its supplemental stated that.LOL, SOP,
"[e]xcluding changes caused by demand. the First Amendment will
"133reduce GHG emissions. it did not argue that thenot
First Amendment is expected to increase GHG emissions.
The Commission's tindings and observations above are
further discussed in the next Section, below.
i^iCA's Supplemental SOP at 20.
^3^SEO's Supplemental SOP at 18.
^-^LOL's Supplemental SOP at 6.
2020-0090 58
ii.
In considering hidden long-term costs ot reliance of
fossil fuels, the Commission follows gu idance in
Decision and Order 37492, where the CommissionNo.
considered its responsibilities under HRS § 269-6 (b). In re: MECO,
and In re Hawaii Gas, when it reviewed a fossil fuel power purchase
agreement between Kauai Island Utility Cooperative ("KIUC") and
lES Downstreams,
In Decision and Order No. 37492, the Commission found
long-term costs" of the State's reliance ot fossil tuels need to
consider "leakage" which "a reduction in emissions ofwas
greenhouse gases within the State that is offset by an increase in
"135emissions of greenhouse gases outside the State.
The Commission in Decision and Order 37492No.
ultimately found that "leakage" would under thenot occur
KIUC Fuel PDA based on its findings. including: (1) there is a
(quoting In re:
2020-0090 5 9
Consideration of Hidden Long-Term Costs of Reliance on Fossil Fuels
37492,37492").
Docket No.I December
is ionHawaii Gas,
Coop., 1on
3See In re Kauai Island Util. Decision and Order No. 37492, filed("Decision and Order No.
and Order No. 37492 at 29147 Hawaii at 201, 465 P.3d at 648) .
2019-0380,15, 2020
LLC ("KIUC Fuel PPA").i24
that the "out-of-State" GHG emissions as part of the "hidden and
correlation between the amount of fuel purchased and used, and the
amount of GHG emissions at KIUC's facilities; (2) as more renewable
energy projects are added to KIUC's system over time. KIUC's use
of fossil fuels should continue decrease in the future;to
and (3) when less fuel is used at each of the lifecycle stages.
including those stages that occur "out-of-state," the amount of
GHG emissions in the lifecycle associated with the KIUC PPA will
also decrease.
Similarly, after review ot the GHG Analysis and the
record in this proceeding, the Commission finds and concludes that
"leakage" will under the First Amendment for thenot occur
following reasons:
1. observed above. the First Amendment isAs not
expected to increase GHG emissions. The First Amsendmsent's primary
change to the Original Fuel Supply Contract is to increase the
price of fuel purchases from Par, and it is not expected to
materially affect the quantity of imported barrels, outside of
potential demand-related variables.
2 . Regarding demand-related variables, HRS § 269-92
requires "each electric utility company that sells electricity tor
consumption in the State" "establish renewable portfolioto 3.
i36pecision and Order No. 37492 at 40.
2020-0090 60
standard [("RPS")]" of one hundred percent of its "net electricity
of sales" by December 31, 2045, with certain milestone percentages
of "net electricity sales" msandated between now and then (e.g..
13730 percent of "net electricity sales" by December 31, 2020).
3. Similar the findings ofto
Decision and Order No. 37492, the Commission thatexpects as
Hawaiian Electric's RPS increases. its use of fossil fuels should
continue to decrease in the future, and when less fuel is used at
each of the litecycle stages, including those stages that occur
the First Amendment will also decrease.
4 .
where it ultimately decides to purchase LSFO,
such as by providing "the option of Tier 2 volumes being sourced
from! other suppliers to take advantage of over-supply situations
"138where the pricing of fuel might allow for savings.cost
This added flexibility should give Hawaiian Electric the ability
in its future decisions regarding fuel purchases.
^3^See 2015 Haw. Sess. Laws Act 97, §§ 1 & 2 at 245-46.
2020-0090 61
^3®Exhibit D, Application for xApproval to First Amendment to Par Fuel Contract, filed on June 26, 2020, at 1.
The First Amendment gives Hawaiian Electric more
to factor in lifecycle GHG emissions, among other considerations.
out-of-State, the GHG emissions in the lifecycle associated with
5. As a result of the State's established mandate to
lower statewide GHG emissions to a level equal to or less than
139statewide GHG emissions levels emitted in 1990, Par is required
to reduce its refinery emissions by 16% (based on 2010 levels)
2020.140on a steady state basis by January 1, According to
Par's Revised Emission Reduction Plan submittedGHG to
the State Department of Health in 2019, Par proposed to attain
the 16% reduction through a variety of measures, including idling
and suspending certain units, combustion devices,
6. Furthermore, in its recent annual report.most
developments around reducing GHG emissions are likely to occur in
the future. 1^2
i39See HAR § 11-60.1-201.
i^iSee Par's Revised GHG Reduction Plan at 19.
(2020),"
2020-0090 62
i^°HAR § 11-60.1-204 requires that each facility that emits more than 100,000 tons per year of GHG emissions must reduce its emissions by 16 percent (16%) from a 2010 calendar year annual GHG emission level. HAR § 11-60.1-204(d) states that an alternative baseline may be used by Par if approved by the Director of Health of the State of Hawaii.
and GHG generators . 141
Par acknowledges that more regulatory, legislative, and judicial
i42"p^r Pacific Annual Report (2020)," available at https://WWW.annualreports.com/HostedPata/AnnualReports/PDF/NYSE PARR 2020.pdf, at 13.
As to the remaining considerations under HRS § 269-6(b) ,
for the following the Commission finds that:reasons,
7 . discussed above, the First Amendment does notAs
have minimum monthly fuel purchase requirement anda as
Hawaiian Electric's RPS increases, Hawaiian Electric's use of fuel
under the First Amendment is expected to decrease.
8 . Accordingly, the First Amendment allows
Hawaiian Electric to correspondingly decrease its purchase of fuel
in tandem with its efforts to increase renewable generation without
contract penalties. Hawaiian Electric decreases its fuelAs
consumption, fewer funds will be exported for fuel imports.
In addition, associated with usingconcerns
fossil fuels will decrease less fuel is used in favor ofas
renewable energy.
9. the Commission finds that there doesIn summary.
not appear to be evidence in the record suggesting GHG emissions
will increase result under the First Amendment,as a
including "hidden" emissions associated with "leakage."GHG
Further, Hawaiian Electric's increases, the CommissionRPSas
expects the demand tor fossil fuels to decrease, reducing the need
for LSFO. In turn, the Commission expects the reduced demand for
will also reduce the emissions both in-State andLSFO GHG
"out-of-state."
2020-0090 63
c.Public Trust Considerations
regard LOL's contention that publicIn to trust
considerations need to be further developed as it relates to fuel
supply contracts, the Commission agrees that this matter warrants
Hawaii Gas.
the Supreme Court held that the Commission
has a continuing duty to monitor the use of trust property under
Article Section 1 ot the Hawaii Constitution,XI, State
which provides the following:
That being said, the Commission believes that public
trust considerations would be better discussed in its review of a
new fuel purchase contract or renewable energy project(s) that
would ultimately replace the Par Contract, which endsnow on
December 31, 2022. At that future time, the Commission and Parties
and Participants will have additional information review.to
2020-0090 64
All public natural resources are held in trust by the State for the benefit of the people.
For the benefit of present and future generations, the State and its political subdivisions shall conserve and protect Hawaii's natural beauty and all natural resources, including land, water, air, minerals and energy sources, and shall promote the development and utilization of these resources in a manner consistent with their conservation and in furtherance of the self-sufficiency of the State.
In In re: Hawaii Gas,
additional consideration in consonance with In re:
including the plan assessing alternative fuel to LSFOsources
on Oahu.
In support of the above, the Commission notes that:
1. Hawaii filed 9, 2020,In Gas Junere was on
the same day the Application was filed.
2 . No Parties or Participants brought up public trust
issues as a potential SOI or component of an SOI tor either Phase 1
or Phase 2.
3. The First Amendment is new fuel purchasenot a
nor does it amend the Original Fuel Supply Contract tocontract,
increase the commitment of LSFO purchased from Par.
4 . discussed further below, the Commission i sAs
requiring Hawaiian Electric to develop a plan that assesses
alternative fuel including analysisto LSFO,sources an on
renewable alternatives. This plan should be filed byenergy
Hawaiian Electric at the beginning of 2022.
D.
Conditions of Approval
As discussed above, notwithstanding the approval of the
First Amendment, the Commission its unresolvednotes concerns
about the circumstances surrounding the negotiation of the
First Amendment, as well as Hawaiian Electric^s ability to address
2020-0090 65
establishes the following conditions of approval ("GOA No. #") to
address the concerns discussed above in Sections III.B.l, III.B.2,
III.B.3, and III.C.
1: Hawaiian Electric shall file a comprehensiveCOA No.
update to its FMP no later than January 31, 2022 . The FMP was
intended be "a roadmap integrate fuelto to procurement,
existing fuel-related infrastructure owned by other entities,
existing and planned fuel-related infrastructure tor the
Hawaiian Electric Companies, the integration of biofuels,
and compliance with Renewable Portfolio Standards ("RPS")
"143goals. The most recent substantive update to the FMP was filed
144with the Commission on January 29, 2016, in Docket No. 2014-0217.
Since then, Hawaiian Electric has been submitting non-substantive
updates, recently filed 29, 2021,status most Januaryon
2018-0413.in Docket No.
2020-0090 6 6
^"^^Docket No. 2018-0413, Letter From: K. Katsura To:Commission Re: Docket No. 2018-0413 - For Approval of Fuel Supply
^^^Docket No. 2014-0217, Letter From: D. Brown To: Commission Re: Docket No. 2014-0217; For Approval of the First Amendment to the Low Sulfur Fuel Oil Supply Contracts with Chevron Products Company, filed on January 29, 2016, Attachment D.
a similar situation in the future.
^"^^Docket No. 2009-0348, Letter From: D. Endo-Omoto To: Commission Re: Docket No. 2009-0348 - For Approval of aSecond Amendment to Low Sulfur Fuel Oil Supply Contract Between Hawaiian Electric Company, Inc. and Chevron Products Company, filed on January 31, 2012, Attachment D at 1.
As a result, the Commission
While Hawaiian Electric submits brief status updates to
finds that a more
comprehensive update is needed address the Commission'sto
regarding alternative supply andLSFOconcerns
contingency planning, should Par exit the State. Accordingly,
Hawaiian Electric shall include. minimum. the followingat
the updated FMP:components to
1. A detailed plan for structuring its portfolio of
commercial balance fuel supplyarrangements to
and risks. This plan could includecosts
strategies such of varyingcontracts terms,as
diversity in suppliers. options to access import
infrastructure independent of existing supplies.
and options for hedging.
2 . An analysis the feasibility of spot marketon
purchasing and how Hawaiian Electric would
undertake conducting market purchases,spot
if deemed necessary.
3. A contingency plan that addresses alternative fuels
further consolidation in the refineryto LSFO,
C
2020-0090 67
Contracts and Fuel TerminallingRefining, LLC; Quarterly Status Report Attachment C at 1. Similar language status updates.
its FMP twice per calendar year, the Commission
Agreement with Par Hawaii Filed January 29, 2021,was filed in previous
market, and the potential exit of Par from the
The contingency plan shall includeState. an
analysis of renewable energy alternatives instead
of fossil fuels for electricity generation.
4 . GHG analysis based the Company's updatedA on
including analyses of each of theFMP strategy,
various scenarios presented in the FMP.
The updated shall be submitted later thanFMP no
January 31, 2022, so that the Commission has ample time for review.
in light of the expiration of the Par Contract on
December 31, 2022.
COA No. 2: The Commission directs Hawaiian Electric to
collaborate in good faith with the to develop theSEO COP.
The Commission agrees with the SEO that the COP "would provide
and key decision makers with inf oriTiation andusers
mapping functions facilitate situationalto awareness,
collaborative planning. and enable decision makers,
supporting agencies, and organizations to make more effective.
consistent, and timely decisions that support their strategic
"14 6 The Commission also
i^^SEO's Supplemental SOP at 7.
2020-0090 68
notes Hawaiian Electric's statement that it is "willing to work
goals, mission, and statutory functions.
with the SEO and other stakeholders throughout the State as the
establishes and reviews the including providingSEO COP,
•t 147information or answering questions throughout the process.
Should the find Hawaiian Electric' sSEO not
collaboration in developing the COP to be in good faith, the SEO
Commission by letter filed in this E)ocket,may
including a detailed accounting. upon which the Commission may
take action as it deems appropriate under the circumstances.
COA No. 3: Hawaiian Electric shall notify Par, in timely
accordance with the terms of the Original Fuel Supply Contract,
that it will not enter into extension past the Original Terra of
December 31, 2022.
finds that the Evergreen Provision contained in the Par Contract
is in the public interest. discussed above,not As
Hawaiian Electric should be pursuing means to consistently lower
its fuel costs, diversify its supply base, and increase generation
from renewable resources. Thus, while finding the First Amendment
reasonable to address Hawaiian Electric's near-term fuel supply
needs. the Commission does not support this form of contractual
^'^’^Reply to Supplemental SOPs at 21.
2020-0090 6 9
renewal, as it bypasses Commission review and does not allow for
After careful consideration and review, the Commission
consideration of changes in circumstances.
seek additional extensions the Originalto out past Term,
which effectively nullifies the Provision.Evergreen
This direction is consistent with the Commission's general
position in other dockets for fuel purchase agreements and power
purchase agreements, where the Commission has expressed concern
149over such provisions.
In addition. the Commission finds
that the Par Contract does not contain clear language regarding
Hawaiian Electric's and Par's termination rights and
re-negotiation rights. the Commission advisesAs
Hawaiian Electric that should it seek a new fuel purchase agreement
with Par or any other entity after the Par Contract ends, any new
fuel purchase agreement submdtted shall contain clear language
that the Commission will review to ensure that uncertainty around
termination and/or re-negotiation rights is eliminated.
Co. ,
2020-0090 70
a result.
Docketfiled onCo., Inc., filed on
Accordingly, as stated
e. g. , In re Hawaiian Elec. Co., Inc., No. 2020-0138, Decision and Order No. 37521, December 30, 2020 at 55 (quoting In re Hawaiian Elec.Docket No. 2014-0356, Decision and Order No. 33036, July 31, 2015).
above, the Coiriraission is directing Hawaiian Electric to not elect
as discussed above.
IV.
ORDERS
THE COMMISSION ORDERS:
1 . Sub j ect the condit ions in Sectionto III.D,
the First Amendment between Hawaiian Electric and Par is approved.
2 . Subject to the conditions in Section III.D, to the
such recovered in Hawaiian Electric'sextent costs notare
base rates, Hawaiian Electric's request to include the costs of
the First Amendment in Hawaiian Electric's ECRC is approved.
3. Hawaiian Electric shall file its updated FMP,
directed by 1 above, by 31, 2022,COA No. Januaryas
in this docket.
4 . Consistent with Ordering Paragraph 3B ofNo .
file its semi-annual updates to its FMP. Said reports shall now
be filed in this docket, instead of Docket No. 2018-0413.
5. Consistent with Ordering Paragraph No. 3A of
file its quarterly status reports, which shall include purchases
of LSFO under the First Amendment with estimated incremental costs
resulting from the First Amendment. Said reports shall now be
2020-0090 71
Decision and Order No. 36280, Hawaiian Electric shall continue to
Decision and Order No. 36280, Hawaiian Electric shall continue to
filed in this docket, instead of Docket No. 2018-0413.
6. This docket is closed; however, the filings
described herein shall continue to be filed in this docket unless
otherwise ordered by the Commission.
JULY 6, 2021DONE at Honolulu, Hawaii
L Griffin, Chairs P.
ommissioner
f R. Asuncilpn, CommissionerJr. ,
APPROVED AS TO FORM:
2020-0090.ljk
2020-0090
72
hif er M. Potter,
PUBLIC UTILITIES COMMISSIONOF THE STATE OF HAWAII
By JJe
By Leodol
ByjJ.
Noa K. ChingCommission Counsell
CERTIFICATE OF SERVICE
Pursuant to Order No. 37043, the foregoing Order was
served the date it uploaded, to the Public Utilitieson was
Commission's Docurnent Management System and served through the
Document Management System's Electronic Distribution List.
FILED
2021 Jul 06 PM 13:01
The foregoing document was electronically filed with the State of Hawaii Public Utilities
Commission’s Document Management System (DMS).
PUBLIC UTILITIESCOMMISSION
