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Study on Electric Utility Suggests ‘Paradigm Shift’

A recent study on Maui County’s electric utility could play a large role in shaping the future of Molokai’s electric service. The independent study, contracted by the county to consulting company Guernsey, examined alternate forms of electric utility ownership and operation models. Released two weeks ago, it recommended that Maui County seek an Independent Systems Operator (ISO) or Regional Transmission Operator (RTO) to oversee the electric grid and energy market.

“The County desires to move to 100 percent renewable and sustainable energy as quickly as practicable, and has concerns about the prospects of this progress under the status quo,” states the study.

With the state’s lofty renewable energy goals and the Public Utilities Commission calling for modernization and upgrades to the utility’s system, the study points out this can only be achieved through “a paradigm shift in the power generation scheme for Maui County.”

Key to reaching those goals is determining and implementing the best structure and organization to lead the charge, according to Guernsey. The current Maui Electric model is operated under an Investor-Owned-Utility (IOU) structure whose responsibility is to its shareholders, not ratepayers.

“There’s always a bottom line for a private utility,” said Mayor Alan Arakawa. “Their decisions are influenced by making a profit, whereas an ISO’s only duty is being fair to the consumers and making sure our electrical grid is reliable and efficient, as well as renewable friendly. This community is more than ready for an electrical utility model where they — the ratepayer — is the bottom line.”

Under the proposed model, the majority of physical infrastructure would remain in the hands of Maui Electric. The ISO/RTO would acquire existing dispatch, monitoring and control equipment to manage the transmission system. This approach could be implemented regardless of the outcome of the proposed merger of Hawaiian Electric and NextEra Energy, as the utility would be subject to the jurisdiction of the ISO/RTO.

While the study notes progress has been made toward renewable energy goals, “current system renewable generation, as configured and managed by MECO, is limited and reaching a plateau.” This can be seen on Molokai, where the threshold for integrating additional rooftop solar power without compromising reliability of service has already been reached.

The timeline remains uncertain, but the study states that implementation for this model would be faster than negotiating a sale of Maui Electric, which could take five to seven years. It also suggests condemnation or eminent domain action as a means to acquire the assets if needed.

The County has announced a proposal to modify state law in regards to county powers of condemnation, specific to utilities. Current language allows the county to exercise condemnation “when it is in the public interest to do so.” The proposed amendment would add a clause specific to acquiring property necessary to operating an electric utility.

The county’s Managing Director Keith Regan said the amendment does not imply the county plans to use eminent domain in this case, but it offers “another tool in our toolbox.”

Arakawa said he will be adding $2 million to the fiscal year 2017 Maui County budget proposal to hire a utility consultant that could take the county through the next steps of the utilities process.

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