ISO/RTO model best alternative to Hawaiian Electric service, Maui report concludes

Dive Brief:

A new report commissioned by the County of Maui, Hawaii, on alternatives to the investor-owned utility business model concluded an independent, nonprofit grid operator is the island’s best choice to take over grid operations from Hawaiian Electric Industries (HEI) subsidiary Maui Electric Company (MECO).
Engineering and architectural consulting firm Guernsey concluded the ideal way to meet the county’s objectives is “an Independent System Operator (ISO) or Regional Transmission Operator (RTO) to oversee the electric grid and energy market.” The next best choice, it added, would be to form an electric cooperative.
The study of alternative utility business models was commissioned by county leaders in response to public sentiment for a municipal or cooperative utility as an alternative to HEI, which is seeking regulatory approval to be sold to Florida-based NextEra Energy for $4.3 billion.

Dive Insight:

Capital costs for a new grid operator would be “relatively low” because an ISO/RTO would need only “existing dispatch, monitoring and control equipment,” the study concluded.

An ISO/RTO on the island would only take over operations of the MECO transmission and distribution grid, but most power plants would remain with the HEI subsidiary.

“The great majority of existing MECO generation assets along with MECO transmission and distributions wires would remain with MECO," Maui County wrote in a release summarizing the findings.

The County would need “political capital to introduce, negotiate and enact enabling legislation at the State level.” But a new grid operator offers a shorter transition than “a negotiated sale or condemnation of the MECO assets, which could take five to seven years or longer.”

Even if the HEI/NextEra merger is approved, Guernsey concluded, the ISO/RTO would still have jurisdiction and could drive renewables growth. Such a model would lead to “competition by providing clear price signals and market transparency so that power producers of all types can make rational economic decisions," the firm wrote.

But if county officials are not amenable to an ISO/RTO model, Guernsey suggested forming a member-owned electric cooperative.

“Of the two primary alternatives for third-party ownership – cooperative or municipal – Guernsey believes – if the ISO/RTO approach is rejected – the most practical choice to be a cooperative business model," the firm wrote. "Legal issues aside, there are practical considerations such as public procurement laws, collective bargaining and bond ratings that make the municipal route more problematic than following a cooperative path. Either approach would still face significant hurdles including concern about utility rates."