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Is Maui Electric ‘Stalling’on Photovoltaic Installations?

Customers object to delays and costly studies; MECO says changes in the works.

August 22, 2013
Susan Halas - Contributing Writer (wailukusue@gmail.com) , Maui Weekly

Maui ranks No.1 in the U.S. for installation of photovoltaic systems (PV), but if you're a local electricity customer who hasn't converted to alternate energy, you may have noticed a dramatic upward creep in your bill.

On Thursday, Aug. 1, all Maui Electric Company (MECO) customers got a substantial rate increase. For residential customers, the hike (depending on category of use) seems to average out to about 10 cents per kilowatt-hour (kWh).

Monthly costs for those who already converted to PV can be as low as a minimum rate $18 per month, and many who switched received hefty tax credits and rebates besides.

Article Photos

Maui leads the nation in the installation of PV systems. At the same time, it has the most expensive electricity costs in America. Above are PV systems in Wailuku.

But for everyone else, Maui has one of the most expensive kWh rates in the country. And despite the happy talk about energy self-sufficiency and mail-outs showing a smiley face on the electric plug (sent to customers at their own expense), the cost of electricity here continues to rise.

Likewise, if you are a residential or commercial customer contemplating a conversion to PV, or a vendor or installer of those systems, you may have encountered a variety of recent obstacles that slow the possibility of hooking up to the MECO grid.

It's hard to understand how Maui can lead the nation in adoption of new energy technology and still have the highest energy costs in the country. Many consumers are not equipped to deal with the complexity of Hawai'i's electrical energy policy and practices. Nor will they ever have the sophisticated and detailed knowledge needed to grasp the nuances of issues before the state's Public Utility Commission (PUC), which writes the rules and regulates the rates in the state.

"Electric McNuggets"

To help our readers better understand what's going on in this field, here are some basic, simplified bits of information consumers should know about the current situation and the direction it may be headed:

1.Maui is a leader in alternative energy

Maui is one of the best places in the world to showcase the success of alternative energy. In 2011, MECO hooked up more PV than the prior decade combined. In 2012, Maui was No.1 in the U.S. for PV systems installed per 1,000-customer-base. According to Peter Rosegg, a spokesperson for Hawaiian Electric Company (HECO) on O'ahu, the island of Maui also leads the nation in the adoption of PV with a 5 percent penetration rate. Rosegg also said the rate of adoption here has doubled every year since 2008.

Maui is a pioneer not only in solar, but also wind, biofuels, thermal, ocean, and other permutations and combinations.

Early adopters of PV and other forms of alternative energy--some of them entirely off-grid--cut the cord to MECO long ago. But most consumers, even if they are credited for the energy they generate via PV, are still tied to the MECO grid.

2.Hawai'i is No. 1 in U.S. electricity cost

Despite such abundant resources, Maui and the state have some of the priciest kilowatts in America. Hawai'i is ranked as the most expensive place to buy electricity in the U.S.

Increased rates for residential and commercial customers went into effect on Thursday, Aug. 1. For example, one category of residential consumers will now pay a minimum base charge of from $10.50 to $15 per month plus an additional 37 cents to 42 cents per kWh depending on the amount of electricity consumed. In this category, there is also a minimum charge per customer per month of $20.50 for single-phase and $25 per month for three-phase power. (See "Schedule R Residential Rates" on page 3.) This is an increase on average of a little over 10 cents per kWh compared with the prior rate schedule for this category, which is only one of many.

These figures are significantly higher than costs for electricity on the Mainland. Recent Bureau of Labor Statistics data estimates a nationwide average of about 13 cents/kWh in June 2013, with quite a bit of variation depending on geographic location.

Commercial rates are more complex and do not lend themselves to easy summaries, but they, too, are headed upward.

3.Increased PV conversions have raised safety issues and needs for upgrades

Though total penetration is still low, some locations are at or approaching the limit of allowable PV hookups.

In areas where the limit has been reached, in order to even be considered for installing a residential or commercial PV system, consumers face new barriers in costs, time and paperwork. In these areas, an "Interconnection Requirement Study" is a prerequisite. The purpose of the study is to verify that adding PV will not adversely affect the operation of the overall MECO system.

"There has been a huge increase in demand," said Steven Rymsha, MECO's renewable energy projects supervisor, during a telephone interview. "Power generated by alternative means went from 1.4 megawatts (mW) in 2008 to 30 mW in 2013."

He stressed that a huge increase in demand for PV has raised safety issues and focused attention on the need for system-wide upgrades. Though those who have already converted to PV "may be a statistically small number the impact is great."

Net Energy Metering (NEM) is the vehicle most commonly used by residential customers who want to install PV.

"A study is only needed if thresholds are reached," Rymsha said. "Though some neighborhoods have reached their thresholds, more circuits are available than not." NEM is one of several programs available and one that requires a study if circuit limits have been reached in a particular locale.

Rymsha is aware that the requirement for a study, its cost and the length of time it takes has not been popular with the company's customers, but he pointed out that the "timeline is set by the PUC and the cost of the study is arrived at by competitive bid. At present," he said, "the Interconnection Requirement Study [IRS] can cost from $3,000 for the smallest residential PV system to as much as $30,000 or more for a complex or large commercial installation." He confirmed that only one consultant is conducting the studies--a New York-based firm that, he said, was the "only company willing to take on the assignment at the price."

He also verified that the study is required to be completed within 150 calendar days.

"Yes, it is a long time," Rymsha said, "but it's tough to get it down. We work hard to meet the deadlines." Counting himself, he added, his department has a full-time staff of five dedicated to the interconnection process.

He pointed out that the paperwork submitted by consumers is often not complete, or changes are made without letting the company know.

"If we get it all at one time, we can complete more quickly."

Presently, he estimated that there are "about 100 individual customer interconnection studies" in progress.

The purpose of the study is to look at the impact of the installation. Outcomes can be no impact, some impact with changes needed, and other issues with other requirements.

"The study identifies upgrades that allow the project to move forward," he said. "All of the customers to date who have gone through the study have gone forward with their projects."

Kaui Awai-Dickson, the company's director of communications, urged consumers considering PV to look at a new page on the MECO Website called "Going Solar."

"It provides guidance for completing the process to apply for PV installation," she said, stressing that by calling MECO first and understanding the step-by-step process, customers could save time.

4.Changes in the works

As for what will happen in the future, Rymsha directed attention to Chapter 16 of the latest Integrated Resource Plan (IRP) released in June. The IRP is a lengthy document that creates a five-year and a 20-year plan to meet the energy needs of the island. He said Chapter 16 puts forward "a more proactive approach."

In the new system, the company will conduct and pay for needed broad analysis and system-wide circuit upgrades. Then the consumer who wants to convert to PV or other forms of alternative energy will pay a share of those costs based on the size of their generation system.

MECO, he said, is in a time of transition. When the new system is in place, it's expected to allow the alternative energy conversions to go forward at a more rapid rate and be more equitable in the distribution of costs.

The method of establishing those costs or estimates for what they might be has not yet been announced. He did not know how long transition period would be, but added, MECO will be "piloting solutions that will be used as a template within the next six months."

Rymsha also said that this method would be fairer to the ratepayers as a whole, because the customers receiving the benefits would pay their share of the costs instead of having the costs spread to all customers, as is now the practice. The desired outcome is a utility system that is "safe for everybody" and upgrades paid for by "those who receive the direct economic benefits."

The goal, he said, is to allow expansion and to reduce delays experienced by the small customer. Another benefit to the interconnecting customer, he said, is that they will not need to wait for an IRS study to be completed.

As for specifics of the new plan, he thought it was "too early to know. Our hope is it's quicker and less costly, too."

5.Firm power vs. soft power to fulfill the need for stable flow

Electricity generated by the utility is called "firm" because it's reliable, stable and flows at a constant rate.

Electricity generated by other means is called "soft" because it only flows when there's sunshine or wind, for example. When a cloud passes by or the wind stops blowing, there is a drop in energy produced. In order to prevent dips, the utility's own power generators kick in to level the flow.

The backup capacity must be sufficient to power the entire system in the event that there are short or long periods when soft energy is not being produced.

The utility also provides the technology that modulates the spikes when there is too much energy being produced.

The company is working on upgrades to its facilities. It also has ideas on ways to store energy, but those improvements are not yet in place.

Presently MECO's power plant burns diesel fuel.

6. Is it fair? Has it been abused?

The PV installers sell on commission, and not surprisingly, they have sold up. In past years, they have encouraged customers to install a reserve capacity they may not have actually needed. And it was a common practice to break single household systems into multi-part components to qualify several times for large and plentiful incentives.

The people who were early PV adopters had no problem in connecting to the grid and received financial benefits that were heavily subsidized by state and federal tax credits, and in some cases, actual cash rebates.

Even though many of these loopholes have been closed, the current system still favors those who have the upfront capital to install the new technology. This shifts the burden of paying for the old (and some say, outmoded) MECO business model to those who can least able to afford the increases.

7. The only game in town

MECO is a division of Hawai'i Electric Industries (HEI); this company provides 95 percent of the power consumed in Hawai'i. Only Kaua'i has a different electric utility, which is run as a cooperative.

MECO is Maui's only electric company, and its grid is Maui's only grid. Even as it sees its consumer base eroding, it is also making a good-faith effort to comply with state goals for energy self-sufficiency by 2030. To that end, it has hosted a variety of energy planning events and ongoing panels to gather public input.

MECO and HEI are regulated by the PUC. The PUC writes the rules and sets the rates, but the parent company, HEI, has significant input in drafting them. HEI is good at suggesting what the company finds appropriate and in bird-dogging its own interests.

The company also has a healthy budget for providing a steady stream of public relations messaging about its work and pushing its own point of view. These costs are permitted by the PUC and absorbed by the customers.

It is difficult to get understandable, accurate and balanced information relating to MECO and HEI. Though there is a huge amount of data available to the public, almost no effort is made to translate it from utility-speak into understandable English. In the absence of plain language, there is a pervasive suspicion that the information provided by the utility is biased and self-serving.

8.HEI is a for-profit stock exchange-listed company paying hefty dividends

HEI is a stock exchange-listed company that has paid dividends continuously since 1901, according to the firm's Website. By definition, a for-profit utility is run for the benefit of the shareholders and not the ratepayers.

On Tuesday, Aug. 13, an article on Forbes' Website ranked HEI as one of the top ten utility companies in the U.S., rated by the size of the dividend it pays to shareholders. This month, HEI (HE) is trading at a little over $26 a share and pays an annual divided reported at about 4.6 percent ($1.24 per share per year).

9.Pay attention to energy storage advances

If you are an electricity consumer thinking of PV at a home level, this is a squeeze year. Either do it now or expect to soon encounter yet another set of rules and requirements with costs that are presently unknown.

But there are some benefits to being a late adopter. One is you get more recent technology. You don't need a crystal ball to see that billions of dollars and some of the best minds in science and finance are focused on energy storage devices. Most people call them batteries, but that may not be the name of the next breakthrough in electrical storage.

One of the best-informed people interviewed for this story suggested that a consumer faced with the option of paying $3,000 for a "study" to determine if his/her PV system could be squeezed onto the existing grid would do well to think about spending the money on batteries and forgetting about MECO entirely.

As for battery "breakthroughs," Rymsha was skeptical. "They have been predicted for the last 30 years," he said. He also noted that battery backups to PV systems are presently available, saying these can keep the electricity going during power outages, but add to the costs.

10.Mum's the word

The Maui Weekly has seldom written a story where so many sources wanted to be "off the record." Some in business community here are actually fearful that if they speak up about the many delays and costs they have encountered--especially on larger projects that want to install PV--MECO will retaliate against them or they will risk jeopardizing their existing relationship with the company. Although they may provide useful information, they do not back it up in action or name.

In January and again in August, the Maui Weekly talked mostly to "experts." These were electrical and other engineers, solar and PV installers of home and commercial systems, the managers and owners of large commercial electricity consumers, energy consultants, and business people who were leaders in other forms of energy.

The one thing they all have in common is they prefer to remain anonymous.

11.Most informed sources think there is validity to the MECO position

"Yes," they say, "it is the only electrical company we have, and if the grid were to become unstable through overload, there is no nearby supplemental grid to help out." Unanimously, they said it is in the best interest of all to maintain the viability of the existing grid.

But when it came to the company's overall veracity and transparency, most of them had caveats regarding the motives and leadership provided by HEI and MECO.

 
 

 

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