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A dozen people testified in front of the state agency that regulates Hawaii utilities on Thursday about a proposed biofuel surcharge that would raise electricity rates for customers on Oahu and the Big Island.

The project under scrutiny is a proposed biofuel plant in the Kau region of the Big Island that would utilize hundreds of acres of fallow land to produce drop-in biofuels for Hawaiian Electric Co. from a range of agricultural feedstocks.

Aina Koa Pono, a biofuels start-up company, signed a contract with the utility to supply 16 million gallons a year of biofuel by 2015. The contract is pending before the Public Utilities Commission.

The projected cost of the biofuel is significantly higher than the price of petroleum. If spread amongst ratepayers on the Big Island, where the biofuel will be supplied, the cost of the biofuel would increase rates substantially for Big Island customers who already pay much higher rates than Oahu residents. As a way of offsetting the cost, Hawaiian Electric hopes to spread the premium throughout ratepayers on Oahu. This would raise average residential electric bills by about $1.75 to $2.10 a month.

While the Honolulu hearing convened by the PUC was intended to address the biofuel surcharge in particular, testimony centered on the merits of the project, which has attracted heated debate. Among those testifying were Robbie Alm, executive vice president of Hawaiian Electric; local union leaders; partners in the Aina Koa Pono venture; the consumer advocate; local residents; Henry Curtis, executive director of Life of the Land; and Kat Brady, a local activist.

Based on previous testimony submitted to the PUC, and speakers at the Thursday hearing, community sentiment appears split.

Local leaders from the Carpenters Union and International Longshore and Warehouse Union, spoke in strong support of the project, which is expected to create 400 construction jobs and 100 permanent plant jobs.

The Kau region has declined economically since the demise of the sugarcane plantations.

“I remember the town as a bustling town, full of people both young and old. A town filled with businesses, recreational events, and a town alive with life,” wrote Clyde Silva, a fourth-generation Pahala resident, in previous testimony submitted in favor of the plant. “Today it is a town that is dying. So many businesses have closed . . . The youth leave town right after graduation, they don’t even stay around anymore. What is here for them?”

However, opponents of the project have voiced concerns about the potential environmental and health effects of the plant, which uses a microwave technology; its impact on water supplies; and the prudence of using the fuel for electricity, as opposed to transportation needs.

Testimony in support of the project emphasized the project’s positive impact on not only energy, but agriculture and the economy.

“We are committed to getting off of oil and to renewable energy sources,” said Alm. “This is a significant step. What we do see is a project that uses fallow agricultural lands to create renewable energy, fuel security, jobs and economic development.”

Aina Koa Pono is leasing land from the Edmund Olsen Trust. Supporters say that the operation could also benefit food agriculture. Much of the Olsen’s 10,000 acres of former sugar cane land in the Kau region has lain fallow for the past 15 years, according to John Cross, who submitted testimony on behalf of Edmund Olsen.

“Unfortunately, and believe me we have looked, we could find no other viable large-scale agronomic uses until Aina Koa Pono came along,” wrote Olsen to the PUC. “We are now persuaded that this is the best way to bring agriculture and jobs back to Kau.”

Other testifiers, including Curtis, raised questions about the project’s transparency and the high cost of the fuel. Hawaii law says biofuels must be cost effective, at or below the cost of petroleum, or “just and reasonable,” according to Curtis, who also argued that no more than a five cents per gallon premium could be added to such fuel. Curtis questioned whether the utility had the legislative authority to sign a contract with a higher surcharge.

Curtis, and others within the energy sector, have also argued that locally-produced biofuel should be used for transportation rather than electricity needs. Otherwise, the state won’t have enough land to reach all of its energy goals. Ground transportation makes up about one-third of the state’s petroleum imports.

Asked to respond, Hawaiian Electric spokesman Peter Rosegg told Civil Beat that, “There is no other company or organization in Hawaii that could do a RFP like we did for a local start-up that could really get this industry going. Down the road it could very well be used for transportation.”