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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: January 3, 1997
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Exact Name of Registrant Commission I.R.S. Employer
as Specified in Its Charter File Number Identification No.
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<S> <C> <C>
Hawaiian Electric Industries, Inc. 1-8503 99-0208097
Hawaiian Electric Company, Inc. 1-4955 99-0040500
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State of Hawaii
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(State or other jurisdiction of incorporation)
900 Richards Street, Honolulu, Hawaii 96813
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(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:
(808) 543-5662 - Hawaiian Electric Industries, Inc.
(808) 543-7771 - Hawaiian Electric Company, Inc.
None
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(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS
HELCO POWER SITUATION
BACKGROUND. In 1991, Hawaii Electric Light Company, Inc. (HELCO) identified the
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need, beginning in 1994, for additional generation to provide for forecast load
growth while maintaining a satisfactory generation reserve margin, to address
uncertainties about future deliveries of power from existing firm power
producers and to permit the retirement of older generating units. Accordingly,
HELCO proceeded with plans to install at its Keahole power plant site two 20-MW
combustion turbines (CT-4 and CT-5), followed by an 18-MW heat steam recovery
generator (ST-7), at which time these units would be converted to a 56-MW (net)
combined-cycle unit. In January 1994, the Public Utilities Commission of the
State of Hawaii (PUC) approved expenditures for CT-4, which HELCO had planned to
install in late 1994.
Despite HELCO's best efforts to install this additional generation, the schedule
for the installation of HELCO's phased combined-cycle unit at the Keahole power
plant site has been revised due to delays in (a) obtaining approval from the
Hawaii Board of Land and Natural Resources (BLNR) of the Conservation District
Use Permit (CDUP) amendment and (b) obtaining from the Department of Health of
the State of Hawaii (DOH) and the U. S. Environmental Protection Agency (EPA)
the air quality Prevention of Significant Deterioration/Covered Source (PSD)
permit for the Keahole power plant site.
CDUP AMENDMENT. On January 3, 1997, the Third Circuit Court of the State of
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Hawaii issued a decision on HELCO's appeal from an order of the BLNR. The
decision in effect allows HELCO to use its Keahole property as requested in its
application for the CDUP amendment. This favorable decision remains subject to
appeal.
PSD PERMIT. In a November 1995 letter to the DOH, the EPA declined to sign
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HELCO's PSD permit for the combined-cycle unit on the basis that a different
emission control technology should be used. After HELCO proposed to the DOH to
reduce net nitrogen oxide emission increases by retiring and/or reducing the use
of certain existing Keahole diesel units, the EPA stated that it found the
netting proposal procedurally and substantively acceptable, and that if emission
increases were kept below significance levels, it would not require the use of
any particular emission control technology. In December 1996, the DOH proposed a
revised draft air permit which reflected HELCO's netting proposal and was
acceptable to HELCO. A public hearing relating to the modifications in the
revised draft permit is scheduled for January 29, 1997.
IPP COMPLAINTS. Two independent power producers (IPPs), Kawaihae Cogeneration
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Partners (KCP) and Enserch Development Corporation (Enserch), have filed
separate complaints against HELCO with the PUC, alleging that they are entitled
to power purchase contracts to provide HELCO with additional capacity which,
under HELCO's current estimates of generating capacity requirements, would be a
substitute for HELCO's planned 56-MW combined-cycle unit at Keahole.
In September 1995, the PUC allowed HELCO to continue to pursue construction of
and commit expenditures for the second combustion turbine (CT-5) and the steam
recovery generator (ST-7) for its planned combined-cycle unit, stating in its
order that "no part of the project may be included in HELCO's rate base unless
and until the project is in fact installed, and is used and useful for utility
purposes." In view of permitting delays and the need for power, the PUC also
ordered HELCO to continue negotiating with the IPPs and directed that the
facility to be built (i.e, either HELCO's or one of the IPP's) should be the one
that can be most expeditiously put into service at "allowable cost."
On January 26, 1996, the PUC ordered HELCO to continue in good faith to
negotiate a power purchase agreement with KCP and file a list of unresolved
issues requiring PUC guidance. On December 12, 1996, KCP filed directly with the
PUC a new proposal pursuant to which it would construct a facility and have
HELCO operate and manage the facility. Although the new proposal had not been
submitted to or negotiated with HELCO, KCP asked the PUC to compel HELCO to
enter into the agreement. On December 19, 1996, HELCO filed a Motion to Dismiss
or to extend the time for responding. The PUC has not yet acted on that motion.
On October 4, 1996, the PUC issued its decision and order that, among other
things, required HELCO and Enserch to continue to negotiate on an expeditious
basis and, within 75 days, to submit to the PUC either a finalized power
purchase agreement or reports on matters that are preventing the finalization of
an
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agreement. As a result of subsequent filings by each party, the PUC issued an
order in November 1996 responding to attempts by Enserch to clarify certain
items in the decision and order. The parties were not able to finalize a power
purchase agreement within the 75 days and, accordingly, filed status reports
with the PUC on December 24, 1996. Negotiations are ongoing.
COSTS INCURRED. As of December 31, 1996, HELCO's costs incurred in its efforts
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to put into service its combined-cycle unit amounted to $49.2 million, including
approximately $26.8 million for equipment and material purchases, approximately
$10.3 million for planning, engineering, permitting, site development and other
costs and approximately $12.1 million as an allowance for funds used during
construction.
CONTINGENCY PLANNING. In June 1995, HELCO filed with the PUC its generation
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resource contingency plan detailing alternatives and mitigation measures to
address possible further delays in obtaining the permits necessary to construct
its combined-cycle unit. HELCO arranged for additional firm capacity to be
provided by its existing firm power producers, obtained contracts shifting loads
to off-peak hours, deferred generation unit retirements and in January 1996
began the implementation of its energy-efficiency demand-side management
programs. These measures have helped HELCO maintain its reserve margin and
reduce the risk of capacity shortages.
DOCKET ON ELECTRIC COMPETITION
On December 30, 1996, the PUC issued an order instituting a proceeding to
identify and examine the issues surrounding electric competition and to
determine the impact of competition on the electric utility infrastructure in
Hawaii. This is similar to what commissions in other jurisdictions have done. In
its order the PUC recognizes that Hawaii's stand-alone island energy systems are
different from the interconnected systems of the contiguous states, but also
recognizes the need to determine how to respond in Hawaii to changes occurring
in the industry. The PUC set forth a preliminary enumeration of the issues,
including feasible forms of competition, the regulatory compact, public interest
benefits, long-term integrated resource planning, appropriate treatment of
potential stranded costs, and the identification of the objectives and the
establishment of a time frame for the introduction of competition in the
electric utility industry. The identified parties to the proceeding are the
Consumer Advocate, Hawaiian Electric Company, Inc., Maui Electric Company,
Limited, HELCO and the Kauai Electric Division of Citizens Utilities Company.
Motions for intervention or participation in the proceeding must be filed by
January 21, 1997. The PUC has not set a procedural schedule for the proceeding,
but has indicated that the parties in the docket should use the collaborative
process to compile information, create a discussion forum, and narrow the issues
to be considered in connection with any restructuring of the electric industry
in response to emerging competition.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized. The signature of the undersigned
companies shall be deemed to relate only to matters having reference to such
companies and any subsidiaries thereof.
HAWAIIAN ELECTRIC INDUSTRIES, INC. HAWAIIAN ELECTRIC COMPANY, INC.
(Registrant) (Registrant)
/s/ Robert F. Mougeot /s/ Paul Oyer
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Robert F. Mougeot Paul A. Oyer
Financial Vice President and Financial Vice President and
Chief Financial Officer of HEI Treasurer of HECO
(Principal Financial Officer of HEI) (Principal Financial Officer of HECO)
Date: January 20, 1997 Date: January 20, 1997
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