Michael Champley, the governor’s newest appointee to Hawaii’s Public Utilities Commission, has only been on the job a few weeks, but he’s already deeply involved in one of the most controversial issues affecting Hawaii’s energy future – biofuels.

Last month, the three-member PUC rejected a much-anticipated $350 million Big Island biofuels project in a decision that was seen as a major smackdown of the state’s major electric utility, Hawaiian Electric Co. HECO made no secret of its disappointment at the setback.

Champley, who has an extensive background in the electric utility business, has expressed skepticism in the past about biofuels and whether they are in the customer’s best interest or only help the utility’s bottom-line.

Biofuels “are clearly in the shareholders’ interest,” said Champley, during an interview with Civil Beat a couple of months ago, before he joined the commission. “What you don’t know is if it’s in the customers’ interest.”

The PUC’s decision reflects this concern. In its ruling, the PUC said that the cost of the biofuel was “excessive, not cost-effective, and thus, is unreasonable and inconsistent with the public interest.”

Champley joins Hermina Morita, another appointee of Gov. Neil Abercrombie, and long-time commissioner John Cole, on the commission that wields power over a significant segment of the state’s economy and is increasingly tasked with driving energy policy.

In an interview last week, Champley wouldn’t talk about the decision or other issues that could taint his role as an impartial decision-maker.

But the ruling suggests that with Champley’s addition to the PUC, the commission will be taking a harder line toward HECO and intends to play a bigger role in directing the state’s energy policy.

“The irony of the Big Wind strategy or the biofuels strategy is that you really don’t have an integrated resource plan or state energy policy or strategy plan that has really looked at this whole thing,” Champley told Civil Beat in August. “The utility is driving this.”

The 20-year Aina Koa Pono contract was the first of four that have been announced this year in response to Hawaiian Electric’s quest for local biofuels for its generators on Oahu, Maui and the Big Island. Three are still awaiting PUC approval, and while the utility won’t disclose pricing, expectations are that that, like Aina Koa Pono, the fuel will prove a costly option for Hawaii, whose residents already pay the highest electric bills in the country.

An Energy Heavyweight

Champley takes office as Hawaii is reaching a crossroads in the direction of its energy future. Proponents of renewable energy have grown increasingly divided, even combative. Supporters of wind, solar, geothermal and emerging technologies such as biofuels and ocean energy have begun fighting among themselves. But the main punching bag has been Hawaiian Electric Co.

Asked whether HECO should be concerned about his appointment to the commission, Champley responded with a firm, “No.”

“HECO is critical to the clean energy transformation,” said Champley. “I’ve always been a big believer that each state should have financially healthy utilities.”

While Champley is not well-known among Hawaii’s broader business and government circles, he’s developed a following within the state’s tight-knit renewable energy sector where he’s viewed as a rare commodity in the islands for his extensive knowledge within the cross-sections of “clean energy,” engineering and the corporate boardroom.

“There’s no question that he understands the systems and he understands the policy issues and he understands the business of running a utility,” said Mark Duda, president of the Hawaii Solar Energy Association and a solar company executive. “He’s really bringing a vast store of knowledge to the job and that’s really important right now.”

Champley retired to Maui with his wife three years ago, after working for some 40 years in the electric utility business. He was a senior executive at DTE Energy in Detroit.

Since moving to Hawaii, he’s advised renewable energy companies in the state and worked as a consultant for the Honolulu-based Blue Planet Foundation which works to eliminate fossil fuel use.

He has a degree in electrical engineering from the University of Dayton and a master’s in business administration from Indiana University where he specialized in finance and public utility economics and regulation.

“He brings decades of utility experience to the table, and this is important because if we hope to navigate this transition to clean energy it’s really critical to understand how investor-owned utilities work and what levers to pull to make change happen,” said Jeff Mikulina, executive director of Blue Planet Foundation. “He’s also sympathetic to the challenges and needs of the utility. So I think he can do it in a way that provides a soft landing for them or a smooth transition.”

Taking the Reins on Energy Policy

People who have worked with Champley expect he will bring greater guidance to Hawaii’s energy goals, which include deriving 40 percent of electricity from renewable energy sources by 2030.

“A lot of things are getting decided ad hoc,” Champley told Civil Beat in August.

The recent ruling on Aina Koa Pono suggests that the role of biofuels will be more clearly defined.

The PUC ruling rejected the contract mainly based on its cost, but it also said that there were broader policy issues that were being considered, such as the potential of biofuels to curtail more economical renewable energy sources. Commissioners said that local biofuel “is a critical policy issue that has not been fully vetted from a regulatory perspective,” and that they planned to do “a more comprehensive evaluation of the option.”

While Hawaiian Electric has argued that biofuels are expected to become cost-competitive with oil at some point, as petroleum prices rise, Champley isn’t an easy sell.

He told Ciivl Beat in August that, in addition to the premium for biofuels, there are additional costs in complying with environmental regulations, additional capital investments, the costs of fuel infrastructure and possible operation and maintenance costs.

“I think at any point in time, biofuels will always carry a premium,” Champley said then.

But this doesn’t mean that he will be taking a firm stance against biofuels. He is also attuned to the arguments in favor, such as the ability for local biofuels to stimulate the agricultural sector and create jobs, which he said “absolutely has some merit.”

“This is a tough one to sort out,” Champley said in August. “There are a lot of plusses and minuses. Then you also have a specific project, so it gets emotional because you are saying up or down to a project, as opposed to up or down to a strategy.”

Taking on biofuels and the long list of other issues facing Hawaii’s energy policy is not seen as an easy task, especially when combined with the often thankless job of PUC commissioner. But Champley says he’s up for it.

“For me, this is an honor and privilege to serve, and it’s really, for me, an opportunity to give something to Hawaii,” Champley told Civil Beat last week. “My entire career has been about solving the more challenging problems, whether technical, financial or government and policy issues. That’s what I’ve done for the past 40 years.”

DISCUSSION: What impact do you think Mike Champley will have on Hawaii’s energy policy?*

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