JERA sent a letter to the Public Utilities Commission on Friday signaling plans to form a new public utility called GenCo that would build a natural gas-fired power plant and supply electricity to Oʻahu.
If the commission approved the creation of GenCo, Oʻahu would have two electric utilities tasked with keeping the lights on. Hawaiian Electric CEO Scott Seu said it’s unclear exactly how that would work.
"This has not been done before in the United States. It's certainly not been done here in Hawaiʻi, and there is a lot of pretty complicated questions that would need to be looked at," he told HPR.
Every island in the state has its own power grid, and each consists of three main components: generation, the facilities that produce electricity like power plants and solar farms; transmission, the network of power lines and substations that move electricity across the island; and distribution, the lines and circuits that feed electricity into homes.
Two electric utilities?
In its announcement on Friday, JERA stated that it is “not proposing to replace Hawaiian Electric's role as Oʻahu's retail electric utility,” meaning that HECO would continue to oversee transmission and distribution, operating the grid and providing customer service.
GenCo would generate power from JERA’s proposed natural gas plant, which could meet up to 40% of the island’s demand for electricity, and sell it to HECO. JERA’s letter describes the gas plant as GenCo’s “initial investment,” suggesting that more GenCo projects could one day be connected to the grid.
“We're not sure what opportunities there may be in the future, but at the moment we're really focused on just this particular project,” JERA Americas Vice President of Development Erik Montague told HPR.
But Seu, the HECO CEO, said he anticipates that JERA wants to be the dominant generating utility on Oʻahu.
“(Hawaiian Electric) will continue to be the ones sending the bills out to customers. It's just that we will no longer be controlling the generation piece. … So Hawaiian Electric bills would still be in your mailbox, but standing behind that bill would be the GenCo,” he said.
The deal that never materialized
Hawaiian Electric already buys electricity from independent developers to power the grid. If a developer wants to bring a new energy project online, they wait for Hawaiian Electric to put out a request for proposals and submit a bid. If their bid is chosen, they negotiate a contract with HECO, which must then be approved by the Public Utilities Commission.
This competitive bidding framework has been in place for years.
But when JERA first shared its proposal in March to build a gas plant, Montague told HPR that JERA didn’t feel the project was a good candidate for the competitive process.
There’s only one way for a project to bypass the competitive process — HECO may request that the commission waive the process on behalf of a specific project.
Gov. Josh Green, a proponent of JERA’s gas plant, told HPR that he was expecting JERA and HECO to announce a deal in June and that HECO would have the “opportunity to be a full partner” in JERA’s gas plant.
That deal never materialized. Both JERA and HECO declined to speak about the specifics of any negotiations.
Bypassing HECO
By creating its own utility, JERA can take its plans directly to the Public Utilities Commission without having to go through HECO. But Montague said JERA isn’t making this move simply because it couldn’t come to a deal with Hawaiʻi’s oldest utility.
“It could be perceived that way. But I think that this … has been in the works for some time, kind of regardless of how the HECO-JERA cooperation plays out,” Montague said.
Seu said that HECO would be open to reviewing JERA’s project proposal as part of the formalized competitive bidding process. But for the moment, he said that there are no ongoing conversations between HECO and JERA.
“We really did spend some time trying to understand JERA's proposal,” he said.
“It's just in the details of how (does) Hawaiian Electric, our relatively small company that's been serving Hawaiʻi for over 130 years, how do we … see them as true partners with us? And that's where we've run into these issues.”
