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Friday, November 5, 2021
HECO Suddenly Agrees to 39% Reduction in Cost of Electricity Bought from Kalaeloa Partners
By News Release @ 3:42 AM :: 2416 Views :: Honolulu County, Energy, Cost of Living

HAWAIIAN ELECTRIC CO INC: Entry into a Material Definitive Agreement (form 8-K)

News Release from Hawaiian Electric, 11/04/2021

Item 1.01 Entry into a Material Definitive Agreement.

On October 29, 2021, Hawaiian Electric and Kalaeloa Partners L.P. (Kalaeloa), a limited partnership, entered into an Amended and Restated Power Purchase Agreement for Firm Dispatchable Capacity and Energy (Amended and Restated PPA). The Amended and Restated PPA amends and restates in its entirety the agreement between Hawaiian Electric and Kalaeloa dated October 1988 (Original Agreement), as amended by amendments number one through six, the most recent of which was entered into on October 12, 2004 (the Original Agreement as so amended, Amended Agreement).

The Kalaeloa facility, which was completed in 1991, is a combined-cycle operation, consisting of two oil-fired combustion turbines (CTs) burning low sulfur fuel oil and a steam turbine that utilizes waste heat from the CTs (Facility). The Facility is designed to sell sufficient steam to be a qualifying facility under the Public Utility Regulatory Policies Act of 1978.

The Facility provides essential reliability services, as Hawaiian Electric increases its reliance on intermittent renewable sources of energy. The Amended and Restated PPA also provides Hawaiian Electric with a mechanism to require the Facility to convert to the use of an alternative fuel, subject to certain conditions, should Hawaiian Electric deem it necessary or desirable, including for the purpose of meeting the requirements of the renewable portfolio standards law, greenhouse gas reduction requirements, or State of Hawaii energy policy objectives.

The Amended and Restated PPA provides for a term of 10 years from the date of approval of the Amended and Restated PPA from the Hawaii Public Utilities Commission (PUC), with the continued obligation during the term for Hawaiian Electric to purchase 208 megawatts (MW) of firm capacity, with the fixed capacity charge being reduced to $100/kilowatts (kW) per year for the full 208 MW, as compared to $164.35/kW per year for the first 180 MW and $112/kW per year for the additional 28 MW, under the Amended Agreement.

Additionally, the price and structure for operations and maintenance charges under the Amended Agreement were replaced in the Amended and Restated PPA with a variable operations and maintenance charge of $0.005/kilowatt-hours (kWh) in 2022 dollars, escalating with the gross domestic product implicit price deflator (GDPIPD), a fixed operations and maintenance charge of $90/kW per year for 208 MW, and an overhaul component charge of $425/hour (in 2022 dollars) that each combustion turbine generation unit is operated plus the number of times that each combustion turbine starts multiplied by 20 during the calendar month, escalating with GDPIPD.

In exchange, requirements for a minimum energy purchase were removed.

The Amended and Restated PPA also

(i) includes updates and additions to the performance standards in the Amended Agreement which provide greater flexibility to Hawaiian Electric's system operators in the dispatch of the Facility,

(ii) requires Hawaiian Electric to reimburse Kalaeloa for any carbon (or similar) tax imposed in connection with its operation of the Facility, subject to the qualification that any order from the PUC approving the Amended and Restated PPA will not be acceptable to Hawaiian Electric if it does not allow Hawaiian Electric to recover such amounts through Hawaiian Electric's Purchase Power Adjustment Clause,

(iii) requires Kalaeloa to substitute the parent guaranty provided as operating period security with a letter of credit,

(iv) requires Kalaeloa to engage in certain community engagement and outreach activities, and

(v) updates the cybersecurity provisions.

Subject to limited exceptions, the effectiveness of the Amended and Restated PPA is subject to the satisfaction of certain conditions, including issuance by the PUC of an order approving the Amended and Restated PPA that is acceptable to Hawaiian Electric.

read … Full News Release

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