by Andrew Walden

A $150M Hawaii subprime lending scheme is receiving an “AAA-“ rating from Fitch because repayment is guaranteed by a surcharge on your electric bill.

The Bond Buyer, October 30, 2014, explains:

(Green Energy Market Securitization (GEMS)) bonds being issued by the state acting through the Department of Business, Economic Development and Tourism will fund a program to provide low-interest loans targeting residents with poor credit or low income who want to install energy saving devices like solar panels on their homes.  Goldman, Sachs and Co. is lead manager for the bond sale….

A lending program “targeting residents with poor credit or low income”  is guaranteed to have a high default ratio, hence the term “sub-prime.”  But Goldman Sachs is not worried because a law signed by Governor Neil Abercrombie in June, 2013 forces Hawaiian Electric ratepayers to pay an adjustable “surcharge” designed pick up the tab for the deadbeats.

Fitch analysts cited the non-bypassable surcharge applicable to all current and future electric utility ratepayers and the true-up mechanism that provides the ability to adjust the surcharge to meet the bond obligation debt payment for its rating.

…Hawaii is the first state in the nation to use this type of financing to help consumers pay for clean energy installations…. the bonds would be repaid from a surcharge on the bills of Hawaii Electric customers, not added to the property tax bill. The surcharge, being called a green infrastructure fee, will be offset by a reduction in the public benefits fee that is currently on electric bills.

Ratepayers are paying for GEMS right now but most did not notice because the charge is currently the same as the former “public benefits fee.”  As homeowners default, the “true-up mechanism” allows your electric bill to be increased to pay for the deadbeats.  That is why the charges are being added utility bills instead of property tax bills.

"The GEMS program initially will focus on investments in PV systems and other technologies that support PV interconnection, such as energy storage, advanced inverters and monitoring devices," according to DBEDT officials. "Other proposed clean energy projects will be evaluated on a case-by-case basis through a process being established by the program."

Solar is probably the biggest consumer scam in Hawaii today.  About 4,500 Hawaii homeowners have been tricked into buying solar systems which the installers knew could not be connected.  Many of these suckers are now paying a double electric bill—an un-reduced HECO bill plus a monthly financing payment for the now-useless solar system.  The local media covers for the crooked contractors by peddling the story that HECO is to blame for contractors conscious choice to make sales on circuits known to be overloaded.  Major solar contractors such as RevoluSun have been caught red-handed and yet no enforcement occurs.  Campaign contributions sure do pay off.

HECO November 3, 2014 announced a fix which will allow many of the 4,500 to be connected.  According to the HECO news release:

“Their PV systems must use inverter models that meet stricter settings for preventing transient overvoltage, or rapid voltage spikes, that can endanger customers, their appliances and utility equipment.”

Who is going to pay for 4,500 new inverters?  The Bond Buyer explains GEMS will pay for “advanced inverters and monitoring devices.”

HECO’s announcement promises they are: “working on a range of other customer options, such as a non-export model incorporating battery storage….”

The Bond Buyer explains "The GEMS program initially will focus on investments in PV systems and other technologies that support PV interconnection, such as energy storage….”

HECO’s announcement says the utility is “working on … a community solar program, that will support a tripling of customer-sited solar in coming years.”

The Bond Buyer explains: "Other proposed clean energy projects will be evaluated on a case-by-case basis through a process being established by the program."

Overpriced and poorly installed solar systems will still have to be paid for by homeowners.  Many will malfunction before being paid off.  Houses saddled with double electric bills will drop in value compared to their neighbors. 

By starting Hawaii’s solar binge without GEMS, many of the credit-worthy installations have been made.  Now the most expensive systems will be installed  “targeting residents with poor credit or low income”.  This will cause mortgage defaults and repossessions. 

All of this will show up on electric bills statewide as the “true-up mechanism” is used to increase the “non-bypassable surcharge” in order to pay off Goldman Sachs’ investors.

Goldman Sachs made a lot of campaign contributions to National Democrats to make all of this possible. 

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PDF: Hawaii $150M Sale First for GEMS Program