An electric utility is expected by all to provide reliable service at reasonable prices. Kauai Island Utility Cooperative has been in operation on Kauai now for almost 11 years. The reliability of its service has been rather good, but it
An electric utility is expected by all to provide reliable service at reasonable prices. Kauai Island Utility Cooperative has been in operation on Kauai now for almost 11 years. The reliability of its service has been rather good, but it has failed to deliver power at reasonable prices. Its Kauai customers are now paying about 50 percent more for their power than they did when KIUC acquired the Kauai Electric business from Citizens Utilities in 2002, and the kilowatt-hour charges are among the highest in America. KIUC’s charges are reprehensible because its presentation on acquiring the business was that it would be superior to its predecessor, because its mission was to serve its customer-members instead of generating profits for Kauai Electric non-resident stockholders. It has failed that mission.
The primary source of KIUC’s high charges is its cost for what KIUC terms “commodities” but what may be better called its cost for the power source used — fossil fuel, hydro or solar. When KIUC began its operations in 2002, about 90 percent of its power source for generation was from its fossil fuel facilities. At this date, after almost 11 years, fossil fuel still comprises essentially the same percentage.
Why this passivity? KIUC management and directors should have been well aware that to serve the interests of its members it needed to reduce the sky-high service charges of over $0.45 per kwh it makes to most of its customer classes. The residential class customer is the largest in dollar amount of these classes. Because the acquisition price for the business from Citizens Utilities was distended heavier interest and amortization costs were incurred making it very difficult for KIUC to achieve meaningful economies in its non-generation expenses. But generation costs should have been better handled.
The actual potentials for KIUC to reduce generating costs are limited. Hawaiian law encourages use of renewable sources. Of these solar and hydro are the most likely. Wind and marine have not proven either feasible or economic. Other potentials are bio mass and natural gas.
At present, it is estimated that the cost of generation of power by fossil fuel is about $0.23 per kwh. Based on public information the cost of purchased power from photovoltaic sources is $.20 per kwh plus administrative expense. The cost of hydro power appears to be less than $0.10 per kwh. Member attempts to obtain information as to the costs per kwh of the pending bio mass contract have been blocked by KIUC, but it seems likely that its per kwh cost will exceed $0.20
A number of assumptions would have to be made to provide an estimated per kwh cost for natural gas, including its availability in volume and the shipping charge, but it seems probable that it could be around $0.10 per kwh.
It is apparent that the only power sources that would enable KIUC to reduce substantially its generation service charges are hydro and natural gas.
In the case of hydro, KIUC made some rather clumsy efforts to explore an expansion of its hydro production and entangled itself in a messy political problem. Apparently it has ceased its search as its hydro production has been mostly level since 2009. Natural gas for electric generation is widely used on the Mainland. Obtaining it in bulk for Hawaii presents some challenges but the potential economies it would provide justifies the effort. While a fossil fuel, it is clean burning and its carbon footprint is minimal.
It is likely that customer charges could be reduced by about a third by KIUC’s conversion to having substantially all of its generation by hydro and natural gas.
The key questions for both these power sources are whether the KIUC board and management are motivated to serve its membership by reducing their service charges (KIUC’s revenues) and whether they are willing to make the effort that is necessary for the changes that will be required. These adjustments would require a basic reorientation of the KIUC organizational mentality.
Recently I wrote a Forum article about legislative bills pending that could reduce Public Utility Commission oversight over KIUC and suggesting increased membership participation in KIUC affairs. My article must have touched a sore nerve because a prompt response was made by KIUC’s vice-chairman and its communications director making unseemly personal attacks and arguing, wrongly I believe, that I had misconstrued the bills. Nothing was said about my main point that the membership should be more engaged.
In a sense, KIUC has become a fortress in which its officers and board are hunkered defensively. They must learn that bristling when thoughtful comments or criticism are offered is not the right answer. Rather they should be considered and when justified appropriately implemented. It is most probable that such a reconstruction of its leadership thought processes might enable KIUC to far better serve our community.
• Walter Lewis is a resident of Princeville and writes a biweekly column for The Garden Island
