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Fuel Cost Screening Tool –

Overview

This overview is intended to provide the user of this fuel cost screening tool and those interpreting 

outputs generated by the tool with an understanding of the sources and uses of information used within 

the tool, a general understanding of how the tool functions, and the component parts of the tool 

including locations of data/information and types of data utilized within the tool

Purpose

The purpose of this tool is to allow economic impact comparisons between different electricity 

generation fuel types specific to a selected set of power plants operated by Maui Electric Company 

(“MECO”) and the Hawaiian Electric Company (“HELCO”). The tool itself is a spreadsheet-based cost 

model incorporating user inputs for a range of power plant fuels from the existing "business as usual" 

case utilizing residual fuel oil, to lower sulfur industrial fuel oils, and ultimately distillate fuel oil.

The tool utilizes cost information as reported by MECO and HELCO, as well as publicly available 

information regarding market capacities and prices. The screening tool incorporates historical utility fuel 

and nonfuel costs and interacts those costs with user-defined fuel price inputs to report out on a dollars 

per megawatt hour ($/MWh) basis the average impact to utility consumers in both utility jurisdictions as 

a result of switching from the base case fuel to an alternative fuel.

Architecture

The fuel cost screening tool is a spreadsheet model utilizing MS Excel. The tool models the costs of 

generation for MECO and HELCO for both the targeted generation units as well as all other utility plants 

on those islands. The tool also takes into account all costs of purchased power for the two utilities. The 

spreadsheet contains multiple tabs identified within the printed documentation here and discussed in 

general below and in more detail in the Methodology section:

 Dashboard - the operator interface panel and results posting area

o Calculations - sheets utilizing tables and data to populate results in the Dashboard

 Tables - sheets consisting of summarized data used than necessary for the 

calculations

Data - sheets consisting of individual data points, such as a specific 

market price observation for a given year, month, etc.

Fuel Input Optionality

The dashboard within the screening tool is the user interface for creating comparisons between the 

base case fuel cost and alternative cases. Within the dashboard, the user is provided with alternatives 

for each individual targeted power plant relative an alternative fuel type and price point. More 

discussion on this matter can be found in the Methodology & Application section below. 

Fuel Premium Approach

The screening tool utilizes publicly available fuel data to calculate fuel price premiums between the base 

case fuel (medium sulfur fuel oil, or MSFO) and the alternative fuels selected by the user. In each case, 
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the screening tool compares historical low, mid, and high price for MSFO with similarly low, mid, and 

high alternative fuel prices. The difference between historical low, mid, and high MSFO and the 

alternative fuel is the incremental fuel cost - adjusted for heat content - that the screening tool uses to 

determine electricity rate impacts.

Utility Rate Impact Estimation 

Electricity rate impact modeling within the screening tool is accomplished by modifying the cost of 

production for the targeted electricity generating plants. In alternative fuel scenarios that do not require 

additional capital infrastructure in order to accommodate a fuel switch from MSFO, the screening tool 

assumes that the affected plants and their fuel supply temperature sure/costs are not impacted. 

Additional information is provided below in the Methodology & Applications section.

“Targeted” Utility Plants

The screening tool and this report focus on a subset of all the generation resources operated by MECO 

and HELCO and refer to those units as the “targeted” plants. That designation refers to the power plant 

units operated by each utility that currently consume residual fuel oil (RFO) and which are within the 

review of EPA’s work for purposes of addressing rulemaking regarding visibility under Regional Haze 

regulations. The targeted plants are indicated in the following table:

Nameplate (MW) 5.0 5.0 11.5 12.5 15.5 7.5 7.5 14.1 23.0 

Operating (MW) 4.7 4.7 11.0 11.9 14.0 7.5 7.5 14.1 21.4 

Plant Operator, 

Unit Name, & 

Capacities

Kahului 

ST 1

Kahului 

ST 2

Kahului 

ST 3

Kahului 

ST 4

Maui Electric Hawaiian Electric Company

Puna

ST 1

Shipman 

ST 3

Shipman 

ST 4

W H Hill 

ST 5

W H Hill 

ST 6
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Methodology & Application

The following discussion addresses in detail the methodology employed in the fuel cost screening tool 

and how that methodology is applied using available data and information. This discussion is aimed at 

documenting in detail the logic utilized in the model and providing a more complete understanding of 

the data sources, calculations, estimates, and outputs. 

The ultimate modeling output of the methodology employed in the fuel cost screening tool is the 

incremental cost impact to average electric utility rates for each of the two utilities, MECO and HELCO. 

The following diagram illustrates at a high level the flow of information through the fuel tool that results 

in the impact to electric utility rates driven by the alternative fuel selected.

Base Case Inputs, Calculations & Outputs

The Base Case represents the costs and volumes associated with the MECO and HELCO utility systems 

during calendar year 2009. The fuel screening tool defines the Base Case year in terms of the fuel 

volumes consumed and fuel costs incurred, reported energy production and power plant unit capacity 

factors that occurred during 2009. 

Unlike the Alternative Cases which are discussed below, the Base Case includes the “business as usual” 

fuel costs as well as all non-fuel costs. As required for calculating the economic impact of alternative 

fuel cases to overall electric rates, the Base Case incorporates all costs for 2009, including general 

administrative, electrical distribution, transmission, and electric supply costs including all sources of 

electricity energy generated at the targeted generating facilities, energy from non-targeted plants, and 

energy purchased by the utilities.

The screening tool calculates the average utility rate for both MECO and HELCO individually by dividing 

the total costs reported in Base Case year by the energy sales during the base case year. The resulting 

unit cost of energy ($/kWh) is compared to the Alternative Case unit cost to determine the incremental 

impact of the selected alternative fuel.

Alternative Case Inputs, Calculations & Outputs

The Alternative Case is compared against the Base Case and represents the costs and volumes 

associated with the MECO and HELCO utility systems during a calendar year after adjusting fuel cost 

inputs (and volume inputs in the case where diesel fuel is the alternative fuel). The Alternative Case 

selection drives the calculation of a “fuel premium” between the Base Case fuel and Alternative Case 

fuel, and applies that premium to all the fuel burns at the targeted plants only, for each utility. The 

screening tool allows the user to select one of the following as the Alternative Case

Base Case fuel 

volumes & costs

Alternative Case fuel 

volumes & costs

Incremental impact 

to overall electric 

rates by utility
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Diesel (includes capital costs associated with retrofitting burners & fuel handling as well as 

adjustment to burned volumes due to the lower heat content of diesel compared to MSFO)

Lower Sulfur Industrial Fuel Oil (LSIFO) @ 0.5% sulfur content

Lower Sulfur Industrial Fuel Oil (LSIFO) @ 1.0% sulfur content

In recognition that forward fuel prices are difficult to predict, and In order to represent a range of 

Alternative Case fuel prices that represent the price volatility of each alternative fuel choice, the 

screening model allows the user to select from a range of fuel premiums – based on historical cost 

reporting from each utility – and also allows the user to input their own fuel premium to test 

sensitivities. Therefore, in addition to selection of a fuel type as discussed above, the model allows the 

user to create an Alternative Case based on the following four pricing scenarios, individually defined as:

1. Low Case: Where fuel prices for the Alternative Case are calculated as the minimum difference 

between monthly reported MSFO prices for each utility and the monthly reported alternative 

fuel prices, where the historical fuel prices cover the six year period of January 2006 through 

December 2011. 

2. Mid Case: Where fuel prices for the Alternative Case are calculated as the average difference 

between monthly reported MSFO prices for each utility and the monthly reported alternative 

fuel prices, where the historical fuel prices cover the six year period of January 2006 through 

December 2011. 

3. High Case: Where fuel prices for the Alternative Case are calculated as the maximum difference 

between monthly reported MSFO prices for each utility and the monthly reported alternative 

fuel price, where the historical fuel prices cover the six year period of January 2006 through 

December 2011. 

4. User Defined: Where fuel prices for the Alternative Case are calculated as the maximum 

difference between monthly reported MSFO prices for each utility and the monthly reported 

alternative fuel price, where the historical fuel prices cover the six year period of January 2006 

through December 2011. 

Non-fuel costs for the non-targeted plants, as well as purchased power costs, are kept at the same 

volumes and costs. The screening tool calculates the average utility rate for both MECO and HELCO 

individually by dividing the total costs reported in the Alternative Case by the energy sales during the 

Base Case year. The resulting unit cost of energy ($/kWh) is compared to the Base Case unit cost to 

determine the incremental impact of the selected alternative fuel.

Alternative Fuel Impact to Electricity Rates

The fuel screening tool utilizes the unit cost ($/kWh) outputs of both the Base Case and the Alternative 

Case to calculate and report the incremental rate impact of the Alternative Case fuel selection. The 

incremental cost is reported both in terms of the impact to fuel costs (entire utility) and the impact to 

overall, average utility rates (entire utility). The screening model includes several graphics that provide 

visualizations of the outputs for each utility individually and in comparison to each other. A sample of 

the graphical reporting from the screening tool is provided below.
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Key Assumptions

The fuel screening tool operates under multiple assumptions that warrant mention and which are also 

identified in the documentation provided on the modeling output. Those key assumptions include the 

following:

The price of LSIFO is assumed to be equal to the historical price for LSFO burned on HECO. LSIFO 

(either 0.5% or 1.0% sulfur content) is not currently consumed by MECO or HELCO, and it not 

known to be currently produced at either refiner on Oahu nor imported to the islands. The 

current HECO fuel policy requires LSFO burned by the HECO plants to be at or below 0.5% sulfur. 

Therefore, LSIFO that would be produced, blended, or imported by either of the Hawaii 

refineries would be reasonably expected to follow similar market pricing pressures as those that 

influence the low sulfur fuel oil currently burned by HECO plants.

The price of LSIFO 1.0% and LSIFO 0.5% is set in the model at the same value, however, the user 

does have the ability to modify the price of 1% LSIFO as a percentage of 0.5% LSIFO. This 

approach was taken based on the assumption that historical LSFO pricing (itself at 0.5% sulfur 

content) as described above, would most closely represent a suitable proxy for 0.5% LSIFO. 

Therefore, the user has the ability to modify the LSIFO 1% price, even though the screening tool 

is set initially to price 0.5% and 1.0% LSIFO the same. 

A switch to LSIFO from MSFO would not require any modifications to fuel handling, boiler 

technology, or other capital equipment at any of the targeted utility plants. The critical physical 

characteristics of LSIFO (pour point and heat content) are assumed to be the same as MSFO, 

thus all existing piping, storage, shipping, and plant unit infrastructure is assumed to be 

adequate to fully utilize LSIFO.
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Summary of Modeling Output

The screening tool’s operative and critical component parts, including detailed descriptions of 

calculations and data, have been reproduced in the following pages and will provide sufficient 

information necessary to fully inform the reader as to the source, use, and outcomes of all data, 

calculations, and results stemming from the fuel screening tool. 

The discussion that follows in this section therefore is provided as a summary to the additional and 

more detailed information below and it provided to summarize the results of each modeled scenario.

Results Reported

As discussed above, the screening model allows for comparisons between average utility rate relative to 

the Base Case (MSFO burned at the targeted plants) and three Alternative Cases (diesel and 0.5% and 

1% LSIFO) across three historical price premiums (low, mid, and high), and a user-selected price 

premium. With the exception of the user-defined price premium option, the optionality in the screening 

tool results in a total of nine comparisons to the Base Case as described in the table below:

Alternative Fuel Low Mid High

Diesel

0.5% LSIFO

1.0% LSIFO

 

Without consideration of any user-defined adjustment of pricing for 0.5% versus 1.0% LSIFO, the 

screening tool reports out a total of six cases for each utility as indicated below.

The incremental cost ($000) reported above are the result of applying the Alternative Case price 

premium against the kWh of generation identified in the 2009 Base Case year for the targeted plants 

only. Interpretation of the results in the table above are aided by information in the following table 

regarding the amount of energy supplied by the targeted plants and other sources for MECO and HELCO.

$/kWh

% 

Increase 

in Rates

Incremental 

Cost

($000) $/kWh

% 

Increase 

in Rates

Incremental 

Cost

($000)

High 0.244665 0.2752 12.5% $ 6,267 0.2571 5.1% $ 2,543

Mid 0.244665 0.2587 5.7% $ 2,886 0.2494 1.9% $ 979

Low 0.244665 0.2501 2.2% $ 1,116 0.2426 -0.8% $ (420)

High 0.306266 0.3534 15.4% $ 15,065 0.3246 6.0% $ 5,850

Mid 0.306266 0.3290 7.4% $ 7,265 0.3131 2.2% $ 2,195

Low 0.306266 0.3270 6.8% $ 6,621 0.2994 -2.2% $ (2,194)

Diesel

MECO

LSIFO

Alternative Cases

HELCO

Utility

Price 

Point

Base 

Case

$/kWh
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The larger relative cost impacts for HELCO compared to MECO are drive by two factors; the higher 

percentage of the total energy supplies represented by the targeted plants and the larger quantity of 

energy produced by the targeted plants compared to MECO’s targeted plants.

The “Low” price scenarios for LSIFO produce results that indicate that LSFO (as the proxy price for LSIFO) 

has over time been lower cost than MSFO. These negative price premiums, while not appearing to 

persist on a consistent basis over the time series of 2006-2011 evaluated in the screening tool, have

nevertheless occurred as recently as March 2010 and nearly occurred again in early 2011. The graph 

below illustrates the LSIFO and diesel price premiums calculated from data supplied by MECO to the 

State of Hawaii, Department of Economic Development and Tourism for their monthly energy reporting.

Utility

Targeted

Plants

Total 

Utility

Targeted as 

% of Total

MECO 205,281 1,295,188 16%

HELCO 319,596 1,190,696 27%

Energy Supplied (kWh)

-0.5000

0.0000

0.5000

1.0000

1.5000

2.0000

Jan-06

Jun-06

Nov-06

Apr-07

Sep-07Feb-08

Jul-08

Dec-08

May-09

Oct-09

Mar-10

Aug-10

Jan-11

Jun-11

Nov-11

Historical Monthly Price Premium vs MSFO ($/gal) 

(Source: State of Hawaii, Economic Dev. & Tourism)

LSIFO

Diesel