Hawaii residents could be paying tens of millions of dollars in higher electric rates over the next 25 years if state regulators don’t approve a contract for a wind farm on Oahu’s north shore in time for developers to take advantage of a lucrative federal grant.

The contract between Boston-based First Wind and Hawaiian Electric Co. must be approved by Dec. 15, according to the developer and HECO.

The grant would cover 30 percent of the project’s costs. Without it, the higher cost of the wind farm would translate into higher electricity prices for Oahu residents who are already paying rates triple the national average.

HECO won’t say how much the project is expected to cost, but construction must be underway by the end of the year in order to get the grant, part of President Barack Obama’s economic stimulus package.

Competitive Bidding

The contract would be the first wind project approved by the Public Utilities Commission through a competitive bidding process put in place by Hawaiian Electric Co. after the PUC required that projects above 5 megawatts be put out to bid.

Eleven project developers bid on the HECO request for proposals, which was for 100 megawatts of renewable energy for Oahu. 1 Proposals included a range of technologies at different locations. This project is for 69 megawatts.

Shell Oil Co. originally bid on the Kawailoa wind farm, at a significantly lower price, according to PUC documents. While it was under review, First Wind took over the bid from Shell in March 2009, Consumer Advocate Jeffrey Ono said.

First Wind won the bid and then said it needed a higher price because the wind in the area isn’t as strong as first thought.

Ono declined to say how much the cost had increased from Shell’s original bid. The figure is confidential and has been redacted from documents submitted to the PUC by Hawaiian Electric Co.

PUC documents show the price for the wind farm’s energy, without the federal incentive, would average out to 24 cents a kilowatt hour over a period of 25 years. The difference adds up to tens of millions of dollars for customers over that period.

Ono said that the cost of the wind energy is higher than Hawaiian Electric’s projected costs for electricity, most of which comes from oil generation. He wouldn’t disclose the exact amount.

Lack of financial disclosure

Ono said First Wind has declined to provide Hawaiian Electric or the consumer advocate with information on the wind farm’s project costs, financing or projected profit margin.

Such information has been released in the past by other renewable energy developers, however Ono said that “there really is no vehicle by which HECO or the consumer advocate can compel First Wind to provide that.”

Asked if the contract could be denied by state regulators if this information is not provided, he said no.

“That would be a departure from all previously approved [contracts],” said Ono.

Hawaiian Electric spokesman Darren Pai did not respond directly to whether First Wind had provided Hawaiian Electric with such financial details, but did say that the utility was comfortable that the pricing was reasonable.

Pai said that Hawaiian Electric had its own financial models that it uses to try to estimate costs.

“During negotiations for wind and solar projects, we ask developers to provide us with project-specific information to put into the model,” he said by email. “We are continuing to push for as much project-specific information from the developers as possible.”

John Lamontagne, a spokesman for First Wind, said that the company had submitted the financial information required in the bid process.

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