This is an open letter to the members of the Kaua‘i Island Utility Cooperative Board of Directors and to David Bissell, its president and CEO. Aloha: Before KIUC became Kaua‘i’s electric service provider in 2002, power was offered by the
This is an open letter to the members of the Kaua‘i Island Utility Cooperative Board of Directors and to David Bissell, its president and CEO.
Aloha:
Before KIUC became Kaua‘i’s electric service provider in 2002, power was offered by the Kaua‘i Electric (KE) division of Citizens Utilities Company. The management of KE’s purpose was to generate profits for its investor owner.
When the takeover of the business was made by KIUC there was hope that this orientation would change. However, the acquisition was at an undue price well above its market value and despite the fact that KIUC as a non-profit corporation paid no federal or state income tax and it had obtained subsidized borrowing rates to meet its purchase obligations, an initial disappointment was that KIUC was unable to and has continued to be unable to reduce the KE costs of service to its customer-members. In fact, as fuel costs have risen, the cost of service to KIUC’s members is now about 50 percent higher than it was when KIUC commenced ownership.
At all times your paramount mission should have been to provide reliable service to your members at the lowest practical cost. From the outset it has not been apparent that this is your guiding principle. Instead, KIUC has acted as though it was a for-profit enterprise rather than one existing to serve its members. For example, KIUC issues a glossy magazine containing items such as recipes and other non-essential information, and it makes contributions to local charities instead of allowing its members to choose what they may wish to donate.
The amounts of these diversions are small but they illustrate a mentality which cares more about the image you want KIUC to project than serving the interests of your membership.
About four years ago, KIUC launched a well-publicized strategy to achieve a 50 percent diversification by 2023 from the fossil fuel source used to generate about 96 percent of its electric power. It is commendable to seek renewable forms of energy to replace the diesel and naptha now in use. To date, the principle focus has been on solar power and several small power purchase agreements have been made.
One of these agreements provides a troublesome insight into your management orientation. The agreement terms called for a scheduled performance for the solar power producer, Po‘ipu Solar, to meet — and it did not. Per the agreement, KIUC had the option to cancel, which it could have used to renegotiate the agreed 20-cent price per KWH KIUC would pay for power supplied.
As the cost of solar panels has declined significantly since the date the contract was made, Po‘ipu Solar will enjoy a windfall profit at the expense of KIUC customers under the agreed initial price. KIUC management waived the breach of contract and failed to use the right it had to serve the interest of its members.
A much more crucial test of whether you will be faithful to the purpose of serving your members interests is emerging. Much national attention has recently been given to the potential of using natural gas in many applications as the replacement for gasoline and other petroleum products. It is clean burning and in abundant supply with immense reserves which are expected to last indefinitely. It has become the power source for a number of Mainland utilities and is being put into use in fleets of large trucks.
According to the Gas Co. of Honolulu, which has announced plans to initiate supply of natural gas here, Hawai‘i is the only state with no power plants fueled by natural gas. There would be a number of requirements needed to be met for use here. The gas would need to be liquefied, and tanker transportation, harbor and storage facilities and burner conversions would all be required.
At present, KIUC residential customers are paying about 45 cents per KWH for electric power and it is estimated that of this amount fuel costs comprise 23 or 24 cents per KWH.
Given the much lower cost for natural gas for equivalent power as diesel fuel, it appears that if the logistical problems for natural gas use could be met, a power cost of 10 cents per KWH or lower could be achieved for KIUC’s customers.
Under these assumptions based on 2011 usage, KIUC customers could save $45 million per year if KIUC were to supply electric power fueled by natural gas. Stated differently, it would reduce your residential members’ electric bills by 25 percent.
It would likely be several years before KIUC could commence the use of natural gas. But it is not too early to begin to analyze the necessary decisions and action that would be required to achieve the huge benefit for KIUC members that would likely occur if natural gas were to be the predominate power source for KIUC.
For the sake of your members and customers you are urged to take the required steps so that KIUC may join the many other electric utilities that will be enjoying the very substantial economies available from natural gas.
Mahalo.
Walter Lewis is a resident of Princeville and writes a biweekly column for The Garden Island.
