A law mandating discounts for electricity was intended to help a niche and energy dependent sector in the agricultural industry pay its bills. But the rates Hawaiian Electric came up with to meet the new legal requirement are so minor that some farmers say they won’t bother even applying if the state Public Utilities Commission approves them.

The energy company says it was trying to minimize the discount’s impact on the rest of its rate payers as it tried to fulfill Act 203, the 2019 law to help so-called protected agriculture increase local food production by lowering the costs for farming operations that use techniques often seen as highly productive.

The company’s proposed discounts range from 1.2 cents per kilowatt-hour on Big Island to 4.9 cents per kWh on Molokai, savings which could amount to a few hundred dollars annually for some operations. Agricultural advocates say that is not enough to create meaningful savings for farmers or attract outside investment into Hawaii’s food system.

Rep. Ryan Yamane, who introduced the bill that became Act 203, says the proposed discounts are not in the spirit of the legislation.

“I do not know why they came up with that rate. I think it’s way too low,” he said. 

Protected agriculture is generally defined as a means of cultivating crops in a modified environment, such as greenhouses or indoor growing operations. Operations could also include open-air hydroponic operations or aquaponics — which use fish to fertilize plants and consume waste. 

Hawaii only has a handful of successful protected agriculture operations that supply stores and restaurants around the state. But across the world the techniques have been recognized as an efficient means to increase food production by removing a chief variable: climate uncertainty. 

Despite the increased control that comes with protected agriculture and its lower need for water and land, protected operations are typically energy intensive, which translate to hefty bills that are even higher in Hawaii, the most expensive state in the U.S. when it comes to electricity.

The legislation came at a time when several investors, such as Costco, were looking at launching farming operations in Hawaii, which Yamane says provided an opportunity to help boost local food production. Costco never started operations. 

Yamane says the rates were supposed to provide “substantial” savings for farmers. 

Footing The Bill

Jason Brand, a partner at Kunia Country Farms, is grateful for the preferential rate but is uncertain how much of an impact it will make on his operation’s annual energy costs.

The 3-acre aquaponic farm produces approximately 5,000 pounds of produce per week but the cost of energy is a major hinderance, especially as it tries to compete with mainland operators who pay far less for electricity.

The national average rate for electricity is 16 cents per kWh, compared to Hawaii’s rate, which reaches up to 47 cents.

“I certainly don’t want to be at a competitive disadvantage to the average,” Brand said. “Let’s put Hawaii’s food producers on par with the national average.”

At the heart of the issue is the question of what customers are willing to pay to discount protected agriculture.

Hawaiian Electric pricing manager Jeremy Kwock says because there is no indication of how many farmers would apply for the preferential rates, HECO was uncertain of how much it would cost the rest of its customer base.

“Our proposal has lower discounts due to our concerns for impacts to the ratepayers,” Kwock said.

Ulupono President Murray Clay says his organization has crunched the numbers: Even if Big Island farmers using protected agricultural methods had a 50% discount, it would only cost the rest of Big Island’s customers 13 cents more per month on their bill. 

But Ulupono is not vying for protected agriculturists to have their bills halved; it proposed a flat rate of 20% to be shaved off farmers’ bills, compared to Hawaiian Electric’s 1.8 cent discount, with a $1 million limit for the discount.

“Even if you give protected ag folks a 20% discount … no one’s going to see it on their bills. It’s less than 5 cents a month,” Clay said. 

But Hawaiian Electric said using Ulupono’s methodology to determine credits was “problematic,” due to its use of proprietary information gathered from farmers in Hawaii — which it could not share with other parties in the docket.

Nonetheless, the state consumer advocate raised concern that setting the bar too high at the beginning of the program would chart an unsustainable course for the future.

Kakaako indoor farm MetroGrow uses LED lights, water pumps, air-conditioning and dehumidifiers in its operation, which predominantly sells to the restaurant market. The 2,000-square-foot space produces somewhere between five and 10 times more produce than an open air farm of the same size, according to owner Kerry Kakazu.

Because of the high cost of electricity and the usage required, Kakazu installed solar panels, which have helped decrease its bill by 40%, he says.

“I think that’s one of the things that people are concerned about, that businesses will look at it as ‘we have free electricity’ and no motivation to conserve. That’s definitely not our case,” Kakazu said.

For farms to qualify for this discount, they must show they are taking steps to conserve energy and source sustainable energy, while also proving that 70% of their energy usage is used for protected agriculture.

And while the rate is “pretty insignificant,” Kakazu says he does not want to appear ungrateful because it is “better than zero.”

A more appropriate figure would be about 20%, he says.

One of the main issues for Kakazu’s organization is who can access the credits, or if it would be worth it for them, says Henry Curtis, executive director of Life of the Land, which was also in the docket. 

Given the broadness and brevity of the bill and low public input, only time will tell if Act 203 has its intended impact or if growers apply, Curtis says. It remains unclear who is set to benefit, he added. 

“Is this Robin Hood or an anti-Robin Hood approach?” Curtis said. “Can a billionaire apply for the credits?”

What Is Protected Agriculture?

Given the interest from investors in 2019, the way Act 203 has been interpreted by the consumer advocate and Hawaiian Electric has largely revolved around “enclosed structures,” which may leave open-air hydroponic and aquaponic operations unable to benefit from any discount.

This has led to a key disagreement between Ulupono and Hawaiian Electric, as it comes down to each party’s interpretation of what techniques “partially or fully control a plant’s micro-climate,” as stated in the legislation. 

Clay says that anything in open air does not currently count, even if crops are grown in trays above ground or using water pumps. Ulupono thinks they should.

And while Hawaiian Electric says it is staying true to the mandate, in keeping the focus on enclosed structures, the bill’s sponsor, Yamane, says he is open to support outdoor operations such as hydroponics.

Just when or if the Hawaiian Electric proposal is accepted by the PUC remains uncertain, as it can take anywhere from eight to 10 weeks for PUC members to make a decision, but it could be longer.

PUC Chair Leodoloff Asuncion Jr. says that the commission is in the process of reviewing all the  documents, which were fully submitted last month.

“I can’t tell you which way we want to go yet, because we also work on the recommendations of our staff,” Asuncion said.

But Yamane says that if Hawaiian Electric’s rates are accepted as is, he is willing to work on further legislation to increase benefits to farmers next year.