HELCO Proposes New, Cheaper Aina Koa Pono Deal

Hawaii Electric Light Co. is asking state regulators to approve a new contract with Aina Koa Pono which the utility says will be cheaper for its customers than the proposal shot down last year.

Like the proposal rejected last year by the Public Utilities Commission, HELCO would buy 16 million gallons of biodiesel produced by Aina Koa Pono on former sugar cane lands in Ka`u.

However, under the latest proposal, Aina Koa Pono would also produce an additional eight million gallons of biofuel for Mansfield Oil Company for sale in Hawai`i and eventually the mainland, the company said in a statement Thursday.

The Georgia-based Mansfield, which distributes 2.5 billion gallons of petroleum products and bio fuel annually across the US, will also handle the distribution and supply for all of the biofuel from Aina Koa Pono’s Ka`u plant.

HELCO first proposed purchasing AKP biofuel for use in HELCO’s power plant at Keahole, just north of Kailua-Kona, in January 2011. The proposal it submitted for approval by the state Public Utilities Commission called for a surcharge to be paid by the utility’s customers to cover the difference in cost between biodiesel and petroleum diesel. The surcharge would have added $1.55 to $1.86 per month to a typical residential electric bill.

In September, the PUC rejected that proposal, saying it was “not cost-effective” and would put an unreasonable burden on ratepayers.

AKP was critical of the PUC ruling, calling it “short sighted” and anti-biofuels. It said in light of the ruling it was considering selling its biofuel on the mainland where it could get a higher price.

AKP said Thursday its latest contract with HELCO would save its customers $125 million over the contract’s 20-year term compared to last year’s proposal. If in place by 2015, the surcharge would add from 84 cents to a dollar to the bills of typical customers on the Big Island and Oahu.

The price would be fixed and the surcharge would decline as the cost of petroleum diesel rises, company officials said.

Aina Koa Pono plans to build a refinery near the junction of Wood Valley and Meyer Camp roads near Pahala. Using 12,000 leased acres that were once part of Ka`u Sugar Co., it would initially process existing vegetation and local green waste. The company said it would then replant the land with “non-invasive” crops to be converted into biofuel.

The company said it is working with the Hawaii Agricultural Research Center and others to determine the best type of crop to plant. Sweet sorghum, non-seeding napier grass and other sterile grasses are candidates being considered, it said.

When the surcharge was first proposed last year, the PUC ruled that it wasn’t authorized to allow Hawaiian Electric to expand the surcharge to its customers on Oahu and Maui. Because of the smaller customer base, having just Big Island ratepayers paying for the contract would have increased the surcharge as much as ten-fold.

Hawaiian Electric Co., HELCO’s parent company, then went to the state Legislature which then passed a law giving the PUC the authority to expand the surcharge to other islands.