The state might pull one-third of the money from its stagnant $150 million green energy loan program to help lower electrical bills at Hawaii’s public schools.
House Bill 957 — which was passed unanimously by both chambers of the Legislature in May and is awaiting Gov. David Ige’s signature — would give the state Department of Education a $46.4 million, interest-free loan to improve energy efficiency at schools.
In February the state regulators who oversee the loan program approved the DOE’s use of the money to replace fluorescent bulbs with LEDs, or light-emitting diodes, and install other energy conservation measures to help create cooler environments in classrooms at 242 of the state’s 256 public schools.
The loan program has largely been left untouched after being created by the state in 2013. It was designed to make energy more affordable for low-income families.
The program, Green Energy Market Securitization, or GEMS, raised roughly $150 million through a bond sale. The program has used less than 2 percent of the funds, failing to meet its goal of lending all the money by the end of November 2016.
GEMS has used $2.9 million of electrical utility ratepayer money to pay for administrative costs since inception, and interest payments during the 15-year life of the bonds will total $33 million.
When drafting HB 957, legislators directed that the funds be “issued free of interest charges,” which observers say could be problematic because of the interest the loan program is obligated to repay.
Ratepayers would shoulder the $8.9 million in interest payments because the DOE wouldn’t be paying any interest.
GEMS is paid for by ratepayers via a line item on their electrical bills. GEMS has to pay 2.99 percent interest on the $150 million in bonds.
“It puts (GEMS) in a bit of a pickle,” said Kyle Datta, general partner at Ulupono Initiative, a renewable-energy investment firm. “The concern for GEMS … is that they have to pay back the interest.”
Gwen Yamamoto Lau, executive director of the GEMS program, said the proposed retrofits should save the DOE — one of the state’s largest consumers of energy — approximately $114.9 million over 20 years, a savings that would also be shared by taxpayers.
“Providing any state or government agency a vehicle to lower its ongoing operating costs, (such as) lowering its utility costs, also benefits its taxpayers, most of whom are also ratepayers,” she said.
Proponents of the plan say lowering the DOE’s electrical bill would complement the state’s other initiative to provide cooler learning environments for students.
The “cool schools” effort was launched in January 2016, when Ige promised to provide air conditioning for 1,000 classrooms. The project faced delays because initial proposals came in significantly over budget.
When lawmakers agreed to fund the 1,000-classroom initiative, they required that a portion of the money be used for “energy efficient lighting and other energy efficiency measures” to help offset energy use.
DOE officials said recent upgrades at Honowai Elementary in Waipahu can serve as a model for the state’s mission.
The DOE invested $1.2 million, an average of $50,000 per classroom, to increase energy efficiency, which included switching lights to LEDs, replacing motors in the Honowai cafeteria’s refrigerator and freezers, and adding efficient air ventilation to the cafeteria’s kitchen.
Officials said the campus consumed 463,000 kilowatt-hours in the 2015 school year. The efficiency measures reduced electricity use by 115,000 kilowatt-hours.
The LED lighting changes alone reduced the school’s daytime lighting use by 42 percent and its nighttime use by 62 percent.
The DOE plans to spread its repayment of the loan over 20 years, using savings from energy efficiency projects.
“Basically, we get to spread that $46 million over a 20-year horizon, at least,” Amy Kunz, DOE chief financial officer, said at last month’s Board of Education Finance and Infrastructure Committee meeting.
Under that scenario, she said, the department would need to budget roughly $2.8 million in savings from energy efficiency annually for the loan principal payoff.
Ige hasn’t said whether he will sign the bill. His office is reviewing the policy and legal implications of the bill, said Jodi Leong, Ige’s press secretary.
The governor has until July 11 to sign, veto or allow the bill to become law without his signature. If it becomes law, the DOE will get the funds in July.
Staff writer Nanea Kalani contributed to this report.