Hawaii Governor’s Race: Clear Differences On Energy Policy

July 16, 2018

U.S. Rep. Colleen Hanabusa’s family gas station in Waianae plays a featured role in the gubernatorial candidate’s life story.

Her campaign bio leads off talking about the filling station run by her parents, Isao and June. And a sepia-toned photo of the station is prominently displayed on the campaign website, above a picture of Hanabusa as a young legislator at the Hawaii State Capitol.

But more than nostalgia links Hanabusa to the fossil fuel industry.

Hanabusa served as a director of Hawaii Gas, which is a subsidiary of Macquarie Infrastructure Corp. of New York, from June 2015 to November 2016.

And in sharp contrast to the incumbent, Gov. Davide Ige, Hanabusa says she’s open to using natural gas to produce electricity until Hawaii’s 100 percent renewable law kicks in in 2045.

The candidates say they share the same general vision when it comes to the state’s energy future. Both, for instance, support the law that requires 100 percent of the electricity sold in the state to be produced by renewable resources like wind and solar by 2045.

The question, Hanabusa says, is, “How do we get there?”

That’s where some of their differences start to appear. One that came out in interviews with both candidates is the role of Hawaiian Electric Co., the state’s near-monopoly electric utility that provides power on Oahu, Maui and the Big Island.

“It’s pretty clear that in Hawaii, the governor has more control over our energy policy – and how much people will pay for electricity – than anywhere else.” — Rep. Chris Lee

Hanabusa told Civil Beat that when it comes to HECO the status quo may not be the best. She’s open to different management of the company, perhaps even as a cooperative like the Kauai utility.

The idea of a HECO takeover hasn’t been part of Ige’s vision: he staunchly opposed the proposed merger between HECO and NextEra, a Florida-based energy giant, a couple years ago and hasn’t discussed a buyout.

Although Hawaii’s energy policy is spelled out generally by statute, Hawaii’s governor plays a significant role in implementing the policy, says Rep. Chris Lee, chairman of the House Energy and Environmental Protection Committee.

The governor appoints commissioners to the state’s energy regulatory board, the three-member Hawaii Public Utilities Commission, for instance. And the governor oversees the Department of Business, Economic Development and Tourism’s State Energy Office.

What happens over the next four to eight years may determine whether Hawaii consumers start seeing a drop in their energy bills as solar and wind power continue to replace fossil fuels, Lee said.

“It’s pretty clear that in Hawaii, the governor has more control over our energy policy – and how much people will pay for electricity – than anywhere else,” said Lee.

LNG As A Bridge Fuel

Ige and Hanabusa’s differing views on natural gas present the clearest contrast between the two.

“What I don’t understand,” Hanabusa said, “is why is it that we would want to continue to burn the heavy oils, which is what we’re doing now, when we can have a cleaner less expensive bridge fuel?”

In the past, Hawaii Gas, NextEra and HECO all have proposed importing more LNG to Hawaii for power generation.

For Ige, natural gas simply isn’t part of the equation. Ige’s predecessor, former Gov. Neil Abercrombie, had extolled the benefits of super-cooled liquefied natural gas, known as LNG, as a clean fuel that could be shipped by tanker and help lower electricity costs for Hawaii ratepayers while reducing carbon emissions.

But Ige strongly opposed LNG, saying it made no sense to invest heavily in infrastructure – ports, gasification facilities and the like — that the state would quit using in the not-too-distant future.

Since ousting Abercrombie in 2014, Ige has doubled down on clean energy.

That’s won him a strong base of support from clean energy advocates. Henk Rogers, a Hawaii software entrepreneur who started Blue Planet Foundation to promote renewables, held a fundraiser for Ige at Rogers’ Roundtop home in February.

The Sierra Club has also endorsed the governor.

“He’s a recognized global leader on clean energy policy and transitioning a whole state away from fossil fuels,” said Marti Townsend, the Hawaii Sierra Club’s executive director.

Carbon offsetting — taking actions like planting trees that help to counteract carbon emissions — is the latest idea to come out of the Legislature, and Ige says using LNG even as a bridge fuel would work against that effort.

“That’s really what our objective is: trying to stop global warming, greenhouse gases,” Ige said. “So obviously energy and green renewable energy for electricity generation is a big part of that.”

Bringing Down High Energy Costs 

One of the thorniest issues for policymakers is how to drive down costs for consumers. Regardless of the fuel source — LNG or renewables — customers generally foot the bill for infrastructure improvements through rates approved by the PUC.

The current plan generally calls for a market-based solution: encouraging competition among developers of energy-producing projects, like solar and wind farms, will lead to innovation and lower costs to produce electricity from renewable resources.

Opponents of natural gas say it doesn’t make sense because it will take years to build infrastructure and retrofit facilities, and then we’ll just quit using natural gas in 2045.

The argument for natural gas is that we can use it almost immediately to power the state’s big, existing power plants that now run on oil or coal shipped in from overseas. And LNG is cheap, abundant and cleaner-burning than diesel and coal.

In fact, before Ige ruled out natural gas, LNG appeared to be a viable option for a coal-burning generator in Kapolei that provides as much as 25 percent of the island’s electricity. The AES Hawaii power plant has to quit using coal in 2022, and, with LNG off the table, it’s not clear what will happen.

Whatever the case, Hawaii residents pay the nation’s highest rates for power.

Statewide electricity rates were almost 24 cents per kilowatt hour in 2016, according to the latest data from the U.S. Energy Information Administration. That was more than twice the national average of about 10 cents per kilowatt hour, and 33 percent higher than the next most expensive state, Alaska, where customers paid almost 18 cents per kilowatt hour.

This is a major issue for Hanabusa, who questions whether the state’s current policy is delivering relief to working-class households.

“I would contend on the island, people who can afford it, who can afford solar, who can afford batteries, PV systems, who can afford electric cars and so forth – they haven’t been my constituents,” Hanabusa said.

In light of the costs, Hanabusa said, she doesn’t understand why “we would set a policy that we will continue to burn basically black oil” as the state transitions to renewables.

“So when you ask about LNG you know I believe that it’s a bridge fuel, but I don’t understand why we’re so afraid,” she said.

Hanabusa stressed that any move to LNG would have to pencil out as an investment that wouldn’t extend beyond 2045.

But Ige is unswayed.

“That’s just replacing a fossil fuel with another fossil fuel, and it really doesn’t align with our commitment to 100 percent renewable energy,” Ige said.

Ige maintains that it makes no sense to invest in LNG when the state plans to quit using fossil fuels in about 25 years.

As for costs, Ige said the price of electricity from solar augmented by battery storage is becoming competitive with oil and even coal. He noted a project on Kauai, expected to be operating by late 2018, that will sell electricity at 11 cents per kilowatt hour.

As more of these projects come on line, “You’ll begin to see lower rates,” he said.

The Long Shadow Of NextEra

The difference between Ige and Hanabusa on energy policy also is reflected in their political supporters.

While Ige is backed by environmentalists including the Sierra Club, Hanabusa is getting a ton of money from NextEra, the company that Ige and his PUC appointees stopped from taking over HECO in 2016. The failed, $4.3 billion business play ultimately cost the Florida company $95 million to get out of the deal even after it was rejected.

Officials from both companies maintained that the merger was in the public interest. They pointed to a promise of $60 million in customer savings over four years and the ability to expedite plans to wean the state off imported oil due to NextEra’s expertise in renewable energy and greater buying power.

But their arguments never persuaded Ige, then-Consumer Advocate Jeff Ono, top state energy officials or roughly two dozen nonprofits and other groups that intervened in the case.

Ige had doubts about the company’s commitment to the state mandate of achieving 100 percent of its electricity use from renewable sources. And he opposed its plans to use LNG as a bridge fuel.

But a new administration could open up other options between the HECO and NextEra, whether that’s LNG, wind farms or an undersea cable — all projects NextEra scrapped under the Ige administration.

And NextEra has been increasing its financial support to Hanabusa’s campaign to help her win.

The NextEra Energy PAC donated $6,000 to Hanabusa in September. So did NextEra Energy Transmission President Eric Gleason, who led the merger effort in 2015 and 2016. Hanabusa received another $9,000 from NextEra President and CEO Armando Pimentel and NextEra Energy CEO James Robo.

And during the first half of this year, a dozen more NextEra executives donated a total of $20,000 to her campaign.

A NextEra spokeswoman did not respond to requests for comment about the contributions.

Hanabusa stressed that she believes the PUC would ultimately have to approve a merger, but she said, “I don’t see how that merger would be beneficial to the consumers and the state right now.”

Still, Hanabusa did say that Hawaii should explore its options –  perhaps spinning HECO assets into a ratepayer-owned cooperative  – if that could put Hawaii on a faster track to meeting its energy goals.

Hanabusa says her view of HECO was shaped in part by her work as an attorney fighting the company’s proposal to run a series of high-voltage power poles through Waianae.

In a 1996 decision, the Hawaii Supreme Court ultimately declined to make HECO bury the power lines, as Hanabusa requested. But she said she learned much about the industry and how the company operates.

LNG is “just replacing a fossil fuel with another fossil fuel, and it really doesn’t align with our commitment to 100 percent renewable energy.” — David Ige

Hawaii shouldn’t refuse to consider something different simply because people don’t like NextEra, she said.

“Why would we ignore the fact that something isn’t working simply because we have targeted one entity, in this case NextEra, as the bogeyman or the person, the entity, that we don’t want?” she said.

For his part, Ige hasn’t recently discussed getting rid of HECO. However, in a statement, the governor said his administration is conducting a legislatively authorized study to review regulatory changes and various ownership models.

“While we are currently conducting this analysis, it appears the co-op model may be more feasible in rural areas, such as Molokai and Lanai, that are eligible for USDA rural utility services loans and grants,” he said.

In the meantime, Ige has supported policies to change the way the utility is compensated. Normally, regulated utilities ensure long-term cash flow by investing in projects approved by regulators and then charging customers to pay for the projects over time. A recently passed bill seeks to change that model by enabling HECO to be compensated for reaching renewables milestones.

HECO says it’s prepared to work with whichever candidate is elected.

“We’ve had three governors since the Hawaii Clean Energy Initiative was signed 10 years ago, and we’ve met or beat every deadline and milestone that’s been put before us,” said Jim Kelly, HECO’s vice president for corporate relations.

“We’re proud of the fact that we are a kamaaina company with a legacy of service to Hawaii, and are now at the forefront of developing and deploying innovative energy technologies that will serve our communities into the future.”

And the next governor will have considerable power to shape that future.