Officer: Anaergia deserves no preferential treatment

MECO maintains the biogas power is too costly, would increase rates to customers

April 22, 2016

By BRIAN PERRY - City Editor (bperry@mauinews.com) , The Maui News

None of Anaergia's proposals to provide electricity or biogas to Maui Electric Co. constituted a "bona fide request" that would qualify the California renewable energy company for higher-than-market rates for supplying power to the utility.

That's the assessment from hearings officer Mark Kaetsu, who submitted his recommended findings of fact and conclusions of law Tuesday to the Hawaii Public Utilities Commission in the ongoing dispute between Anaergia Services Inc. and Maui Electric Co. over renewable energy proposals.

In September, Anaergia filed a complaint with the commission complaining that MECO and its parent company Hawaiian Electric Cos. violated state law when they refused to forward requests for preferential rates to the commission.

In 2014, Anaergia signed a 20-year contract with Mayor Alan Arakawa's administration to build a state-of-the-art waste conversion facility at the Central Maui Landfill, and it has proposed building a $50 million Maui Energy Park in West Maui to grow sorghum, a biocrop that would be processed into renewable fuel at the Central Maui facility.

Both projects have stalled without a signed power purchase agreement with MECO. The utility maintains the fuel would be too costly and increase power rates for consumers.

Contacted by phone Thursday, Anaergia Americas President Arun Sharma emphasized that the hearings officer's filing was a recommendation to and not a ruling by the commission. Anaergia would file a brief in response to the hearings officer's filing, which Sharma said agreed with some of the company's positions but not with others.

MECO spokeswoman Shayna Decker said Thursday: "We are pleased with the hearings officer's recommended decision and order, which confirms Maui Electric abided by state law. We will continue to act in the best interest of our customers as well as work with renewable energy developers on clean and affordable solutions that benefit all of our customers as we move forward to meet our state's goal of 100 percent renewable energy."

Maui County spokesman Rod Antone said Thursday the county would review the hearings officer's comments and take them under advisement.

Under law, the state's policy is to promote the long-term viability of agriculture by allowing for preferential rates for the purchase of renewable energy produced in conjunction with agricultural activities.

Kaetsu noted that Anaergia only officially sought preferential rates from its first and second biogas proposals in early March 2015. Hawaii law authorizes preferential rates for renewable energy produced in conjunction with agricultural activity.

However, it is the commission's responsibility, not the utility's, to establish what those rates would be, he said.

"Accordingly, it is improper for a public utility to insert its own judgment and withhold a request (for the rates) on the basis that the proposed pricing does not meet the standard of 'preferential rates,' '' he said. "Applied here, MECO's argument that Anaergia's rates contained in its biogas proposals was too high was not a valid justification for declining to forward Anaergia's biogas proposals to the commission."

However, MECO would not be precluded from challenging the rates in PUC proceedings, he said.

The hearings officer noted alternative interpretations of "renewable energy," specifically whether the term is limited to "electrical energy" or encompasses renewable fuel sources as well. (The term and its definition are important in determining whether Anaergia's proposals to deliver biogas, a renewable fuel, to MECO would legally qualify for preferential rates.)

Noting that an "ambiguity surrounding the term exists," Kaetsu sought to go beyond the plain language of the statute and considered other factors, including the context of the ambiguous word, its legislative history and the reason and spirit of the law.

After doing so, he said the state law allowing for preferential rates for the purchase of renewable energy in conjunction with agricultural activity "is intended to authorize preferential rates for the purchase of electricity produced from renewable energy sources and does not include renewable fuels."

So, according to Kaetsu's recommendation, Anaergia's proposals to sell biogas directly to MECO would not qualify for preferential rates because it is a fuel and not electricity.

He noted that the Maui Energy Park proposal would appear to qualify for preferential rates (because it proposed the sale of dispatchable electricity), but Anaergia never made an an official or "bona fide request" to MECO to forward the proposal to the commission.

Rather, that project appeared to have been left "in a state of ongoing negotiations" before discussions moved on to the first biogas proposal, Kaetsu said.

It also appeared that Anaergia's Mahinahina project proposal might have qualified for preferential rates, but the company withdrew the proposal without making a formal request to have it considered for the higher rates, he said.

The hearings officer concluded that MECO did not violate state law by declining to forward Anaergia's proposals to the PUC.

* Brian Perry can be reached at bperry@mauinews.com.

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