Green Power Plant Hits Rivals With $450M Antitrust Suit

HONOLULU (CN) — The developers of a troubled green power plant in Hawaii say in a federal antitrust suit that the state’s major electric utility backed out of a deal to buy power from the half-completed, $200 million facility in order to increase the utility’s energy monopoly.

The lawsuit by Hu Honua Bioenergy accuses Hawaii Electric Light of refusing to agree to extensions when the proposed plant hit construction problems, and then terminating their power purchase contract when it decided to buy an existing fossil-fuel plant. The complaint was Courthouse News’ top download on Tuesday.

The suit also names Hawaii Electric’s parent, Hawaiian Electric, and their holding company Hawaiian Electric Industries. Other defendants are Florida-based NextEra Energy, which is acquiring Hawaiian Electric, and Hu Honua competitor Hamakua Energy Partners.

“HELCO [Hawaii Electric Light Co.] is engaged in an anticompetitive and exclusionary scheme, including by eliminating competition in the generation and dispatch of power in Hawaii by precluding competition in the relevant market,” Hu Honua claims in its Nov. 30 lawsuit.

According to Hu Honua, its proposed power plant would produce about 10 percent of the electricity needed for the island of Hawaii by burning “locally-produced biomass feedstock from existing tree plantations on a sustainable, rotational basis.”

Besides helping achieve the state’s environmental goals of moving from fossil fuel to renewable fuel, the plant would create 150 jobs in an “innovative agricultural forestry industry.”

“As of Dec. 22, 2015, the project was fully financed with over $100 million already invested and $125 million of committed capital to complete the project,” the company states in its 76-page complaint.

The Hawaii Public Utility Commission approved the power purchase agreement between HELCO and Hu Honua on Dec. 20, 2013. The utility terminated the deal finally on March 1, 2016.

HELCO blamed missed deadlines caused by litigation between Hu Honua and its general contractor and by a labor union dispute.

Over the course of several more months, Hu Honua made several offers to cut its price for electricity in exchange for deadline extensions, but HELCO repeatedly stalled and made additional demands, according to the lawsuit.

In a statement, Hawaiian Electric said the lawsuit “has no merit” and blamed mismanagement of the project for its decision to terminate the deal.

“Hu Honua is trying to shift the blame for its longstanding troubles onto Hawaii Electric Light and we’re confident we can demonstrate that we have acted in good faith and in the best interests of our customers,” spokesman Jim Kelly wrote.

“Hu Honua now estimates the project cost has more than doubled to over $200 million as a result of its own mistakes, which it now apparently expects Hawaii Electric Light’s customers to pay for.”

Attorney Rex Y. Fujichaku of Honolulu’s Bronster Fujichaku Robbins, who signed Hu Honua’s complaint, could not be reached Tuesday.

But the lawsuit blamed the collapse of the deal on Hawaiian Electric’s December 2014 merger with NextEra and HELCO’s December 2015 deal to buy Hamakua Energy’s fossil fuel plant.

The merger “had the purpose and effect of eliminating Hu Honua as a competitor in the electrical power generation, dispatch, and ancillary services markets on the island of Hawaii,” Hu Honua says in its lawsuit. NextEra either ordered or signed off on the termination of the Hu Honua contract, it adds.

The Hamakua purchase “would leave only one IPP [independent power producer] providing firm capacity on the Big Island, crushing IPP competition for energy generation and deterring the development of renewable energy generation,” it says.

The purchase, which eliminates the need for Hu Honua’s green power plant, will give HELCO more than 86 percent of the market for “firm dispatchable power” and “constitute an abuse of its monopoly power in that market.” Firm dispatchable power is electricity a utility can reliably call up any time.

“Hu Honua represented a material competitive threat to HELCO and HEP,” so less than a month after the acquisition was announced, HELCO canceled the Hu Honua power purchase agreement, the lawsuit says.

Although that agreement required 30 days’ notice to terminate, HELCO delivered its termination letter late on Friday, Jan 15, 2016, and required a response by Monday, Jan. 18, which was Martin Luther King Day.

“Put simply, the letter was a ‘loaded gun to the head,’” Hu Honua claims.

Interestingly, the lawsuit says that about the same time as HELCO was killing the Hu Honua biomass project, its parent company Hawaiian Electric terminated three power purchase agreements with solar power facilities on Oahu.

The complaint accuses the defendants of violations of the federal Sherman Act antitrust law and various forms of breach of contract and unfair competition. Hu Honua is seeking treble damages of the $120 million it’s sunk into half-completed facility already, plus lost profits of about $435 million.

 

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