Hawaiian Electric Co. is launching its first-ever public awareness campaign telling customers to brace for an extended period of high electricity prices.
Electric rates on Oahu have hit record levels in four out of the past five months largely due to an unprecedented hike in the cost of petroleum-based fuel, which the utility burns for more than 75 percent of its electricity production.
HECO will air a series of television commercials starting tonight explaining the forces behind the rising fuel prices and what consumers and businesses can do to help manage the impact both in the short and long term.
"For the first time in our history, we’re going to essentially alert people to the fact that these high bills are going to continue," said Robbie Alm, HECO executive vice president.
"We feel so strongly that we are going to buy television time to have this conversation with the public — to tell them that prices are not going to go down any time soon."
The ads will be paid for with shareholder funds so the cost will not be borne by ratepayers, Alm said.
Most of the petroleum-based fuel that HECO buys from Hawaii’s two refineries originates in Asia, where crude oil products have been trading at a substantial premium to crude available in mainland U.S. and Middle Eastern markets.
Several factors have caused the pricing disparity between Asia and the rest of the world, including the fact that Japan has increased its fuel oil imports after curtailing its nuclear energy production in the wake of a devastating earthquake and tsunami there in March, said Kang Wu, a senior fellow at the East-West Center. High economic growth rates in Asia, led by China, also have put upward pressure on oil prices in the region, he said.
Low-sulfur fuel oil, which is the predominant fuel burned by HECO in its power plants on Oahu, was trading at about 95 dollars a barrel at the start of this year, about $5 a barrel above the price of West Texas Intermediate crude traded on the New York Mercantile Exchange. By July, HECO was paying more than $130 a barrel for LSFO, about $35 more than what WTI was trading for on NYMEX. The LSFO price has remained above $130 a barrel since then while WTI has bounced around between $85 and $95 a barrel.
Alm said part of HECO’s goal is to correct the misperception of many of its customers that when they see crude prices fall on the mainland, they should expect to see a commensurate decline in their electricity bills.
"We think that the public deserves to be told the truth and to have their expectations be realistic," he said. "This is how we have mentally approached oil prices in the past. They spike up and they come right back down. So everybody assumes that when they open their January bill, it is going to go down. In January I guarantee you your bill is not going down. And it’s not going down in February, and it’s not going down in March. We know because we’re purchasing that oil today, and it’s right up here ($130 a barrel)," he said.
The EWC’s Wu said that while demand for crude oil in general has been higher in the Asia region than the rest of the world, the premium for LSFO has been particularly significant because it is what Japan’s power producers have been buying to make up for the shortfall in nuclear power production. He also noted that Hawaii’s two refineries, operated by Tesoro and Chevron, can’t buy crude oil with higher sulfur content because they lack desulfurization equipment.
Alm said the utility will run four different 60-second commercials in the coming months, the first of which will be an overview of the current situation. The initial spot will consist of a "straight talk" conversation between Alm and former television journalist Jade Moon, who has appeared in previous HECO commercials as a "clean energy spokesperson."
Subsequent commercials will address things such as what conservation measures consumers and businesses can undertake to cut their electricity bills. The ads also will talk about the importance of pursuing renewable energy sources as a way to reduce the state’s reliance on oil for electricity production.
"If there was ever any proof of how vulnerable we are and how our economy can be altered by world events that we have no control over, then this is it," Alm said. "But we do have some control over what we use for energy."
