 Ingo, it's Think Tech Hawaii, it's the 12 o'clock block. It's Energy 808, the cutting edge. A visit with Commissioner Jenny Potter. And guess who was on the show? Commissioner Jenny Potter. Don't be surprised. And Marco Mangelsdorf joins us from Hilo and he's gonna, Jenny Potter, are you here or in Maui? I'm in Maui. Okay, all right, we just wanna know who everybody is. We have a list of all the cities we deal with him. And Marco Mangelsdorf, he joins us from Hilo. Good morning, Jenny. Good morning, Marco. Good morning. Hey there, guys. We span the state across three counties. So it's just wonderful to be back with two of the favorite people in my world, especially on a Monday with my dear friend Jenny Potter and my dear friend Jay Fidel. So it's been a while since three of us have populated the screen. So thank you so much for joining us, Jenny. It's just always a special treat for both of us, all three of us, to have you together, us together again. So let's take the dive right into it. An energy subject, which has been getting a lot of play both here in the state of Hawaii and also on the mainland is the capital A energy storage system, which has been generating quite a bit of press as of late. And just a little bit of quick background. So we've got the largest power plant in the state of Hawaii, which is the AES coal plant on Oahu that is scheduled to shut down once and for all and for good and more ways than one by September of next year. And there's a need to get additional generation in some form or fashion when AES goes down, when AES goes off, right? That's a matter of statute, right, Marco? Well, the legislature's got involved. The legislature's got involved. The governor's got involved. There's a task force that's involved. So this is very high profile, right? Yeah. And there have been delays about getting utility scale, solar and storage online. And one of the solutions, solutions kind of in quotation marks is a very large battery, a very large battery that if installed would be one of the largest in the country, it'd also be one of the most expensive in the country. And the commission with the Jay Griffin, Jenny and Leo Asuncion have been very explicit in their concerns over the months, if not longer, about various issues and challenges regarding this battery. And it's kind of come to a head. It is coming to a head. It is still at a head. So with that intro, Jenny, bring us up to speed please from your perspective and what's been going on and what to expect going forward with KES. Thank you, Marco. It's great to see you. It's great to see Jay. Thank you so much for having me on the show. I want to begin with expressing that the opinions I express here are my own and not that of the public utilities commission. So I want to make that pointedly clear. So anything that absolves their responsibility for anything I expressed today. So in terms of the capillary battery project, this is a project that I have held in high reservation since the beginning, and primarily because of the cost to the right pair and the extent of which fossil fuels would be utilized in order to power the battery over the long term. And so in fact, we found, and based on the data that was provided from the utility, we found that the dispatch schedule for the battery actually would remain the same over the next at least three years. So it would still be utilizing fossil fuel, not renewable energy in order to charge the battery. And that is a great concern to the PUC and certainly to me as an individual because obviously when we're actually retiring a plant that's based on fossil fuel, we want to ensure that it's renewed, it's renewable energy that's now replacing it and that's not the direction that we're going. So very disruptive to the goals for the state of Hawaii in terms of what we're trying to achieve. And what we found is that there has been very little planning that has gone into trying to replace the AES facility in regards to other alternatives that could be renewable energy alternatives or that could be demand side alternatives. What we were positioned with in the last two years or about one year now was this battery being sort of the holy grail of the alternative to the AES facility. And the companies have not demonstrated through the record that's on file now in our records that there are other sustainable options to the battery. And so looking at the cost of this battery, it's approximately half a billion dollars over the course of 20 years. However, it doesn't seem that the battery would be necessarily utilized or useful to the grid for anything longer than the next four years. So we're talking about after we have installed stage one capacity from solar and batteries to the island of Oahu and then also stage two are the renewables. So all of these are storage plus battery and plus PV on the island of Oahu that could potentially replace the whole battery entirely. And so in looking at that, it's really disruptive to think that if some of these projects would have come online sooner and on schedule for the stage one RFP, then we would not have the need for such an expensive battery to replace that capacity from AES. So it's a very frustrating situation for the commission. I'm sure it's very frustrating for the companies as well that we can't see these projects come online timely in a way that would actually replace the capacity and energy needs that were necessary to replace AES. And now we're left with this very expensive battery but in the filings from the consumer advocate has estimated that it would be about 19 cents per KWH. And that's just the cost of the battery. That's not the cost of actually charging the battery for the energy that would be released. So if you add on the incremental cost of generation at margin, it could be anywhere from 30 to 40, even 50 cents, depending on when that's actually charged and the demand on the grid. So it would make it literally the most expensive resource that Oahu has ever seen and the most expensive generating plant or it's not non-generating, the most expensive plant that we have on Oahu. And so it's been very difficult for the commission to come to terms with the fact that we have to balance keeping the lights on and as an alternative of allowing there to be a potential for blackouts and brownouts across the Oahu service territory. In particular, we're looking at September, October, November of being very vulnerable months when the temperatures are very high, the trade winds are very low and we see a lot of energy consumption. Those are the times when we would potentially see a blackout and the probability of that is significantly higher now without AES than it would be with AES still online. So the alternative to not approving a battery is truly, do we allow for brownouts and blackouts on the grid in the Oahu or do we permit this battery to come online and allow for there to be adequate capacity? And so it's been a very difficult balancing act for the commission to understand of really trying to balance consumer interests as well as the needs of the grid and in order to find some sort of harmony between each of those components and delivering the energy services that are necessary for Oahu at this time. You know, it reminds me of Charles Dickens and the ghost of Christmas future. So if you look down the past, it sounds like a dilemma either way you go. If there is a battery, there's an extraordinary increase in expenditure and therefore rate payer expense, electric bills. And if there is no battery, then you run the risk of lights out. What a combination of possibility. So my question was going to be what happens in the ghost of Christmas future? I think I now know, but how do we get here? How do we get to this point of dilemma? Well, in my opinion, only being on the commission for three years, having seen no resource plan during that three years in order to replace AES, having nothing communicated to the commission in terms of what was going to be the replacement energy capacity until the second RFP was issued where the commission actually instructed the utilities to increase the capacity and the energy requirements for the, in order to replace the AES capacity. This wasn't something that the companies had done originally that they, when they proposed the RFP. And ultimately, I think from the clean energy initiative that occurred in what, 2010, 2011, that there was, we were on notice, we were on notice to know that this plant would be retired. So is there any reason that in 10 years there wasn't adequate planning other than saying, a storage facility would be the one that would be required in order to replace this? I don't believe that to be the truth. I have a very hard time believing that. So that's what got us here today is I believe like a very inadequate planning on behalf of the companies. And we are in a position now that we have this resource that thankfully came to pass, so that we can ensure that the lights stay on. But ultimately leading up to this point, Jay, I would say that it was inadequate planning on behalf of the utility. So what's the status? I mean, there's plenty in the press about this. And it seems like it's pretty aggravated right now in terms of the conditions that the PUC imposed weren't acceptable to the utility. The utility said they could not operate under those conditions and made a motion for reconsideration only one business day ago, am I right? The PUC issued an order on that reconsideration, reconsidering in part. But can you talk about the status and where it sets up right now and where it goes from here? Yeah, absolutely. So ultimately what we did when we looked at the motion for reconsideration is we evaluated the four conditions that the companies had taken opposition to. And the first was really actually fairly easy for the commission to reconsider. We agree that looking at the PEM, this was for the performance incentive mechanism for the phase one renewable energy projects to come online. And it was about incentivizing them to utilize the renewable energy from those projects over the course of several years. The PEM was focused on the initial year and so when we reevaluated that, we said, you know, yes, that makes sense to reevaluate that condition. What we would like to do instead and what we had already initiated was a mechanism to allow for the commission to evaluate how much energy savings, what are the savings to rate pairs that are foregone as a result of the delays of the renewable projects? So we opened up a specific proceeding to evaluate that as these delays are real. And every time when you think about every day and every year and every month that goes by that these projects are not brought online, customers are facing a higher utility bill because they're facing the volatility of fossil fuels and essentially the ONM and the overhead from the utility in order to provide these services under a certain set of conditions which are basically to generate from the fossil fuel, utility from their entities. And so when we look at what the savings would be for the renewables, there's a huge discrepancy. I mean, it can be 10 to 15 cents per KWH. And so we're actually actively tracking those savings that are lost to consumers as a result of the delays there. And we're just tracking them for now. And then what we'll do is we'll evaluate them at the end of a certain period and we'll determine whether they were and whether they're in the interest of the consumer or whether they were real and prudent in the interest of the utility. And then the other mechanisms what we looked at was how can we take these up in an in a way that will be beneficial to consumers in the long run and really determine that those that we had identified within the proceeding, within the AES proceeding were better served within other proceedings such as the CBRE proceeding, which is consumer, I'm sorry, that community-based renewable energy proceeding and then also the distributed energy resource proceeding. So we transferred the responsibility of those issues if you will of opening up grid constraints into those proceedings so that we can evaluate them appropriately there instead of having that spread practically across. The other one that was the most important component to me personally was about the utilization rate of the actual resource of how much renewable energy is being used to charge that battery versus fossil fuel. And I think every single one of us can agree that fossil fuels are volatile, it's very expensive, it's not consistent with our goals here in Hawaii, the carbon emissions are way too high, we burn dirty, bunker fuel in order to produce electricity here in the state. So nobody wants that. And that was one of the biggest sticking points for me and the approval of this. And so when the companies came back and they said, we need you to reassess this, we agreed to evaluate it per the ability of the commission to prudently review all expenses of company. And so that includes those expenses that are incurred from charging the battery off of fossil fuel above and beyond a threshold that we identified as 50% within the first year in the first and second year. So we still maintain and we have always maintained this authority. There is no time ever in history that the commission has not had the authority to evaluate the prudency of the cost of the companies that they incur. They need to absolutely, they have to prove to us that those costs are prudent. And so this is one of the times where we said, if we didn't state this properly, then we apologize, but let us be explicit about the fact that we have the ability at any point in time to evaluate the cost that you incur because that's part of our mandate. That is part of our job as commissioners. Well, so where does it go from here? Does the order that you entered on Friday let them continue? What has to happen? If anything, is it possible for them to just proceed if they indicated that they may proceed? But where is it set up right now? So what it sounds like the last article I saw in Pacific Business News, it sounds like we met their expectations. So that they're in a position where they feel that they can proceed with this. So I think a lot of the order needed to be clarified in a way that was explicit to the intention of UC and that it wasn't necessarily from the first order. So we had to really work on clarifying that language and indicating to the companies that they have authorization to proceed. However, it's not going to be unchecked. We will be monitoring this from the get-go and we will be making changes to the way that they do business through DEERs, through distributed energy resources and through the CBRE, that we wanna see the market open up to allow additional capacity to come on to the grid in a way that's unfettered by sort of the rules and regulations that are currently in place by the utility so that we can ensure the customers are receiving the maximum benefit. The more renewables that we can push on the grid, the more renewables that will charge that battery. And so if we can unlock sort of those constraints that have existed up to date and it makes it a cheaper environment for everyone, everyone can benefit from that. And so that's really where we're going. The company will follow us through the other proceedings to ensure that their interests are expressed and that they can meet us in the middle or meet the parties in the middle and then we can proceed from there. Ah, you know, renewables is so important unless we forget even for one minute that we're in the middle of something actually more deadly in its own way than the pandemic. It's climate change. Climate change is marching on and we all have to do something. Every man, woman and child in the world has to do something or the results will be really disastrous. They are being disastrous. So, you know, it's very important what you're doing and what you're saying. Now, Marco, do you have any questions or comments so far? Through me, surely you must be jesting and I do call you surely. No, many, many comments and questions always. And I'm gonna have us all leap into the water and metaphorically swim across the channel to Molokai, Molokai, place very near and dear to my heart. And there's some bubbling going on there energy-wise. And I just wanted to get your kind of update, Jenny, on kind of from your perspective, gonna where things are at in terms of renewable energy development. And my take is that, you know, you guys back in your first, one of your first DNOs I think as commissioner, you approved a several megawatt project with Half Moon Venture that was gonna be solar plus storage on Molokai. And as far as I know, that project is no longer in play. And there's a desire on many people's parts to bring more renewable cost. I always want to say cost-effective renewables to the friendly aisle. And I think there are two kind of two levels in play. One is CBRE. I believe there's an ongoing RFP right now request for proposals for community-based renewable energy on Molokai. And a full disclosure, I'm working with some folks that may make a play at one of those projects at some point. And then there's also, would it be a larger utility scale near the one and only NECO Power Plant west of Kanakakai, that would also be solar and storage. So if you could maybe give us a quick update in terms of where things are in play on both those levels, both CBRE and then the big kind stuff. I'd appreciate that, please. Thank you for asking. And you know what's so exciting about this, Marco, is that I was invited to participate in the Molokai Clean Energy Community Hue, sorry. And to come and to speak with them and so that they could ask questions about the commission, about our process and how a community can actually be more engaged. And it was quite an honor, honestly, to be part of that process. And ultimately what came out of that was an opportunity for the community to engage more directly with PUC. And also with, I believe also with the county and with MECO and HECO so that we can actually start working together to address some of the directly address some of the concerns and the needs of the Molokai community. And so it's actually started a wonderful dialogue, I think between the commission and those parties. And certainly I know MECO has been involved over there for a number of years and has a very aggressive goal of 100% renewable. I think that date has passed, that they had hoped for that renewable to be online. And in terms of Molokai New Energy Partners, I just want to confess that I could burn without order. So I wasn't really, I didn't necessarily approve it, but it was just... And one of the reasons my concerns about that was the cost to the community. And looking at really, is this a renewable project that it's gonna be viable? Is it something that's going to help the community out? Is it something that's gonna be the best interest of over 20-year period to deliver renewable and clean energy to the consumers? And my mathematics, it just didn't pan out. So ultimately, one of what we've been trying to do and even meeting with the community is to show them the cost of avoided energy, for example, that the companies provide a monthly detail of the cost of avoided energy and specifying exactly that that cost really is sort of the avoided cost that they want to kind of... When they think about a project, they wanna come in under that cost. And really through this educational process of how ego moves and thinks about how they procure energy and how they burn energy and where it comes from. And for Molokai, it's obviously one of the most expensive places in the world. It really is. It's a remarkable, awful ordeal. And so you think about how can we alleviate some of the stress on a community that is not economically advanced, that doesn't have the sustainability that other islands do, that are relying on diesel fuel constantly in order to provide energy, have commonly experienced outages, have issues at the end of the line with voltage support and frequency. I mean, these are all really serious concerns on how we deliver energy to these communities. And really when we start talking to them, what they want is a voice at the table. They wanna actually have an opportunity to weigh in of like, what are the criteria that you're asking for within these RFPs? Will they fit into our community? And ultimately, is our self-filled options the right options for Molokai? Are these the things that we should be considering? And how can we understand that there will be fair and equitable evaluation of these types of projects when they come to Molokai? And so, wow. I mean, what an opportunity for this PUC to really hear these people out and to bring them to the table, to have a conversation with the companies and with us present to hear what it is that they want. Because when exactly have we as government officials and just the government in general, really given the time for the community to speak up and to provide information and valuable insight into what it will take in order to make their community happy, whole and healthy. And that's exactly what we're trying to do. And so, with the upcoming RFPs, we hope to have their input. We're not planning on issuing them until we hear from them. Not that this juncture, we want their input. So it's a really exciting experience. Well, I can hear the enthusiasm in your voice and just watching you, Jenny. And I'm so excited for you and for us because I mean, now the folks from Molokai, the island of about 7,000 and they haven't had many, how we say, seats at the big table over the years and over the decades. And I know it means a lot to a lot of people and especially on that island to be able to have direct access through you and the commission and to know and feel that their voices, their concerns, their desires are being listened to carefully and not just, yeah, yeah, yeah. Focusing on the big mangos on Maui, the big mangos on the bigger neighbor islands, right? So, well done, guys. Well done, you and Leo, Jay and the staff for giving the folks on Molokai's seat at the table. Really applaud that. This reminds me of the Chief Justice's Access to Justice program where he takes the Supreme Court to various places in the state and he holds court in a high school gymnasium and the kids get to watch how it works for real with the judges and the cases of the lawyers. It's quite interesting. And what you're talking about runs a parallel. It's access through regulation, access to policy. So I think that gives people confidence in government and confidence in policy. Let me also add that it's clear to me that the PUC is one of the most interesting and challenging commissions and governmental organizations in the state. Why? It's like if you look down from above, you see it's like a freeway, going in all these directions in various levels and speeds. And it's really hard to count all the ways. You have to deal with the people like a molochai. You have to deal with the technology. You have to be current on it. You have to deal with business interests who are interested in the bottom line. You have to deal with government in general with the legislature and the governor and the energy office. You have to deal with the public who is so concerned about how much they're paying for and I mean, so many things. I'm sure that's only a small list. And on top of all of this, you have to make new policy, planning policy and policy for the future that takes us to our statutory goals. And that actually is a long way of saying, what about PBR, performance-based regulation? What about that? Where does that fit in what we've been talking about? And cheer up, like we have a minute or two to go. A minute and a half on PBR. Go for it. A minute and a half on PBR. Oh my goodness, oh my goodness. So we are about to issue an order right now on and actually I believe it's coming out today on the performance incentive mechanisms that have been finalized through this proceeding which is really exciting because that's where the rubber hits the road. I think when we think about what performance-based regulation means that actually indicates performance incentive mechanism. So very excited to see that come out. The actual tariffs and everything take effect on June 1st. So that means that this has been, while it's been approved since December, we've been working through the tariffs, we've been working through the performance-based mechanisms, we've been working through all of those issues. And so when we issue this order, it'll be effective on June 1st and then we will see where we go from there. But ultimately the whole intention behind PBR is to address a ton of the issues that we've been talking about today. It really is. I mean, it's talking about renewable energy portfolio standards and accelerating the adoption of renewables so that we can move. And so that's one of the PEMs that accelerates that track. We have greenhouse gas reductions. We have electrification of transportation reductions. We have improvements, investments I suppose, not reductions. So we have a whole host of different kinds of mechanisms and scorecards that we're putting into place to really inspire the utility to perform exemplary. We don't want to see just the same old, same old anymore. This is about transitioning away from cost to service. It's about breaking the link from capital expenditures and profits. It really is about making that movement. And as long as it took us to get here from 2011 when we adopted performance-based rate making and started making that transition, it's gonna take some time for us to make the move and the transition to performance-based regulation. And the utility will be incrementally making those improvements. They're not gonna turn the switch and have it happen overnight. And there's no expectation that they will. But we're offering the financial incentives for them to do this as quickly as possible. And so that's what I'll say about that for now. Marco, we're in a new time, aren't we? Can you comment on that and summarize? Out the window goes the old regulatory compact, right, Jenny? That's right. And in from the other direction comes the new compact which from all appearances will be more better focused, better focused on rate payers and those people who are on the receiving end of both getting the service from the company and also having to pay for it, of course. So, boy, it seems like the three of us just scratched the surface, then it's time's up. Time's up. So there's so many other things I'd like to talk about. I'd like to talk about, but I think we've covered a lot of great ground. So I'll turn it back to you. Bring me back. Yeah, we'll have to get you back. Because there's a lot more to discuss. One thing is clear, Jenny, you're meeting all expectations for a new world of energy. You guys are really, you're in a new chapter, new way of thinking, new way of doing, it's impressive. Thank you so much for your service to this day. Thank you, Jay. Appreciate it. Thank you. Namaste. Namaste.