HECO, AES A lawsuit by a former island resident alleges that Hawaiian Electric Co. and the operator of a coal-fired electricity plant in Campbell Industrial Park "improperly inflated" the cost of electricity for local consumers.
accused of inflating
energy cost
A lawsuit claims the coal-fired
power plant in Ewa could
have been built for lessBy Rick Daysog
rdaysog@starbulletin.comHECO and power plant operator AES Hawaii Inc. said the suit is "unfounded."
In a 41-page Circuit Court complaint unsealed earlier this month, Bruce Knapp, a former Hawaii resident now living in Denver, said that an agreement by HECO to purchase power from AES has led to massive overcharges.
"(HECO and AES) have been and continue to be unjustly enriched by the excessive and unnecessary costs of the facility, the worlds' most expensive electricity plant of its kind," said the suit, which was filed by local attorney Lloyd Asato and Denver lawyer J. Lawrence Hamil.
AES Hawaii -- an independent power provider that owns and operates a coal-fired electricity plant at Campbell Industrial Park -- sells electricity to HECO under a 30-year agreement.
AES Hawaii's 180-megawatt power plant, which was completed in 1992 at a cost of about $380 million, supplies HECO with about 16 percent of its electricity for Oahu.
Knapp's suit contends that AES and HECO misled the state Public Utilities Commission back in 1988 when they argued that AES could build and operate a coal plant much cheaper than HECO could.
Knapp cited a 1992 HECO report which stated that it could build a comparable coal plant for $284 million -- or $96 million less than the cost of the AES plant.
According the Knapp, HECO is paying for 34 megawatts of "unnecessary" capacity at the AES plant. Over the 30-year life of the power contract, the extra capacity will increase costs by $500 million, he said.
Knapp's suit also argued that HECO may have to buy the AES plant or build its own new plant once the 30-year contract with AES expires. The cost of purchasing or building a new plant -- coupled with the cost of buying electricity at "excessive" prices over 30 years -- could add between $2 billion and $5 billion in costs, he said.
Patrick Murphy, AES Hawaii's president and general manager, said Knapp's suit is based on unfounded allegations. He declined comment on the suit's specifics, citing the ongoing litigation.
HECO spokesman Chuck Freedman also said that Knapp's suit is unfounded and noted that HECO does not make a profit on any of the electricity it purchases from independent producers such as AES.
Freedman also noted that Knapp's attorneys originally asked the state Attorney General's Office to file suit against the companies but the state declined.
A lawyer with the Attorney General's Office declined comment. State Consumer Advocate Greg Kinkley, whose office represents consumers during regulatory proceedings before the PUC, also declined comment on the suit, saying he was not aware of specifics of the lawsuit.
Knapp could not be reached for comment.
Asato, Knapp's attorney, described Knapp as a management consultant who lived in Honolulu during much of the period covered by the suit.
The lead attorney, J. Lawrence Hamil, is a Denver lawyer specializing in complex litigation, securities law and real estate law.
Knapp's lawsuit was originally filed under seal in Circuit Court in January as a Qui Tam lawsuit. Similar to a whistleblower's lawsuit, such suits are filed by private citizens in place a state or federal regulatory agency and typically involve allegations of fraud.
The suit, which was unsealed on April 11 by Circuit Judge Eden Elizabeth Hifo, was amended Monday to add class-action status.