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Ormat, Hawaiian Electric seek approval of deal to upgrade geothermal facility

Hawaiian Electric Co. Inc. and Puna Geothermal Venture reached an agreement to amend a contract expected to reduce electric bills on Hawaii Island, lower greenhouse gas emissions and grow the island's renewable energy total to nearly 70%.

The amended power purchase agreement was filed with the Public Utilities Commission on Dec. 31, 2019, for review and approval, under an earlier application by Hawaiian Electric's subsidiary, Hawaii Electric Light Co. Inc., to rebuild two transmission lines to reconnect PGV's Puna Geothermal Venture I facility to the grid.

The facility in Puna has been shut down since the eruption of the Kīlauea Volcano in May 2018, with oil-fired generators making up the loss. PGV is a subsidiary of Ormat Technologies Inc.

If the transmission line construction is approved and other repairs are completed on schedule, PGV expects to resume operations in the second quarter of 2020.

An additional benefit of the new contract is an upgrade of the 38-MW geothermal facility to produce an additional 8 MW of firm, lower-cost renewable energy.

Under the amended contract, the rate paid by the Hawaiian Electric Industries Inc. utility to PGV will be fixed at $70/MWh, instead of being linked to the price of oil.

Once complete, the upgrade is expected to cut typical residential bills by about $7.50 per month starting in 2022 and close to $13 a month in 2023, based on current prices.

"As Hawai'i continues to pursue the goal of achieving 100% of its electricity generation from renewable sources, PGV is an increasingly critical source of renewable energy and capacity, unaffected by volatile fossil fuel pricing, in this region," Ormat CEO Isaac Angel said in a Jan. 3 news release.

Angel added in a separate Jan. 6 statement by Ormat that the amended agreement is expected to generate about 5% to 7% higher total revenue from energy and capacity payments, including the new 8 MW of generating capacity, compared to before the eruption.

The existing contract between Hawaiian Electric and PGV, which expires in 2027, will remain in place until it is succeeded by the proposed amended contract when the upgrade is completed in the first half of 2022. Approval of the new contract is expected in 2020, and extends the term until 2052.