Hawaii utility sets out import plans

26 May 2016, Week 20 Issue 419

Hawaiian Electric is sharpening a plan to ship LNG and to restructure the islands’ ageing Kahe power plant to burn the fuel. The state-owned utility, in a May 18 statement, said it had reached an agreement with Canada’s Fortis to supply it with LNG as a replacement for oil, starting in 2021. This plan should save its customers up to US$3.7 billion over the life of the 20-year contract period.

The Honolulu-based utility said it had asked Hawaii Public Utilities Commission (PUC) to review and approve the proposed contract. Hawaiian Electric is also asking the PUC for authorisation to construct a combined-cycle generation turbine (CCGT) site at Kahe, in Leeward Oahu. This would allow it to maximise benefits from the use of cleaner, less expensive natural gas, while also providing for the retirement of the three older, oil-fired generators at the Kahe complex.

The contract with Fortis is also contingent on PUC approval of the US$4.3 billion merger of Hawaiian Electric with NextEra Energy, the statement said. The project, it said, requires the “substantial upfront financial support and expertise that NextEra Energy can provide.” Florida-based NextEra has significant natural gas experience and has acted as an advisor to Hawaiian Electric on the utility’s LNG plans.

If the merger is not approved, Hawaiian Electric said it would still be interested in pursuing LNG, but said the company would need to negotiate a new contract. This, it said, would mean reduced and delayed savings for customers. 

If LNG is used by Hawaiian Electric, the savings on electric bills for typical residential customers could be as much as US$390 per year for Oahu customers, US$100 per year for Big Island customers and US$15 per year for Maui customers, the statement said. These savings take into account the US$341 million cost of converting existing power plants to use LNG at Kahe Power Plant, Maalaea Power Plant on Maui and Keahole Power Plant on the Big Island. The savings also take into account US$117 million in costs for LNG containers.

Under the deal with the Canadian company, Fortis will has agreed to a 20-year agreement with Hawaiian Electric to supply 800,000 tonnes per year of LNG from British Columbia.

Under the agreement, Fortis Hawaii would supply the LNG to Hawaiian Electric from FortisBC’s Tilbury LNG facility in Delta, BC from 2021.

Fortis’ president and CEO, Barry Perry, said: “Our small-scale Tilbury facility fits well with the needs of customers like Hawaiian Electric and shipping from Canada’s west coast costs less than from other locations, including the US.”

However, Hawaii Governor David Ige opposes Hawaiian Electric’s plan to import LNG, claiming the deal distracts the state from its objective eventually to source all of its power from renewables.