The clauses cover extreme and unforeseen events, and they protect the city from the penalties it normally faces when it doesn’t send sufficient trash to H-Power for HECO and Covanta to use.
Such force majeure clauses are coming more into play during the global pandemic, which has severely disrupted supply chains and the economy.
Earlier this month, Honolulu City Council leadership expressed concerns to Environmental Services Director Lori Kahikina that the city could face severe financial penalties for its trash slump, with Hawaii’s tourism sector almost entirely shut down.
The city has struggled even in good economic times to deliver the required 800,000 tons of opala — trash — to Covanta. As a result, it has paid out millions of dollars separately to Covanta and HECO in recent years for failing to hit that benchmark.
The council members said their concerns stemmed from a Civil Beat story last month that raised the issue of a trash shortfall during COVID-19 — and whether the city might be penalized for producing less opala.
“It might,” Kahikina said in an interview in late April. “It just depends how long this shutdown is going to be for.” And, she added, it depends how sharp the downward trend in opala tonnage winds up being.
The city to that point had seen about a 15% decrease in trash, representing some 5,000 tons, according to Environmental Services.
“If people have lost their jobs and they’re going to take a while to recover, they’re not going to be buying as much” — and not generating as much trash, Kahikina added.
However, in a follow-up email this week Kahikina said she was not aware of the city’s force majeure protections until after the story ran and HECO officials alerted her to them.
She subsequently informed the council of the clauses, too.
“The City will continue to work with HECO and Covanta through the COVID-19 emergency and reasonably believes this unprecedented event warrants relief from the tonnage and energy delivery requirements in the respective contracts,” she wrote in a May 14 response to council members Ikaika Anderson, Ron Menor and Ann Kobayashi.
Those council members had proposed that the H-Power plant accept chipped wood debris, or “feed stock” from PVT Land Co., which runs the island’s only construction and demolition debris landfill, to help make up the trash shortfall. Environmental Services could waive the $91 per ton “tipping” fee to accept that material at H-Power, they suggested.
In testimony Tuesday, Kahikina expressed concerns about that waiver.
“Every other hauler on the island pays a tipping fee … what’s to stop other entities from coming in for free?” she said.
If The Pandemic Persists, HECO Could Opt Out
The force majeure clause in the city and HECO’s power purchase agreement absolves both parties of liability in a force majeure event, although it does add some key conditions.
The impacts cannot be “of greater scope and of no longer duration” than the force majeure event. The city would also have to provide weekly progress reports that detail its efforts to mitigate the situation.
Notably, the agreement states that the local power utility could give notice to opt out of that deal altogether if the event persists longer than 270 days.
The city has paid HECO more than $2.7 million in the last six years to cover incidents where the utility couldn’t produce enough energy from H-Power and it was the city’s fault, according to figures provided by the city.
In 2018 and 2019 combined, it paid Covanta about $760,000 for failing to hit the annual 800,000-ton mark.
Read the council members’ letter here:
Read Environmental Services’ response here:
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