As state regulators gear up for the trial-like phase of one of the biggest business deals in Hawaii’s history — the proposed $4.3 billion purchase of Hawaiian Electric Industries by NextEra Energy — they are also looking for more office space.
For years criticized as woefully understaffed, the Public Utilities Commission has lawyered up and hired new policy researchers, a compliance chief and executive officer, among other positions.
In fact, Randy Iwase has added so many employees since he took over as chairman that the agency has run out of room in its downtown office building. He’s increased the overall staff from 32 to 50 workers since January when he was appointed by Gov. David Ige.
There are plans to transfer some PUC employees to the basement of another state facility while the Territorial Office Building undergoes a multi-million-dollar renovation that will expand office capacity.
In the meantime, staff members are finding desk space where they can to pore over tens of thousands of pages of documents filed in the NextEra case, not to mention the other major dockets before the PUC and dozens of additional matters the agency oversees, from water and sewage to telecommunications and transportation.
“Given the bean-counter nature of Budget & Finance, they couldn’t grasp the urgency.” — Mina Morita, former PUC chair
Space constraints aside, Iwase said he now has the staff and resources he needs to handle the merger case and the other important issues facing the PUC.
“We are ready to go,” he said when asked about the evidentiary hearing in the NextEra case that starts Nov. 30 at Blaisdell Center. A PUC decision on whether to approve the deal is expected next summer.
Iwase has capitalized on the groundwork laid by his predecessor, Mina Morita, who fought for legislative approval to reorganize the PUC by pulling it away from the Department of Budget and Finance and moving it to the Department of Commerce and Consumer Affairs.
“Given the bean-counter nature of B&F, they couldn’t grasp the urgency and need to really look at salary structures of the kinds of positions that the PUC needed,” Morita said. “Under DCCA, the mission’s more aligned. It’s about oversight of regulated entities.”
That transfer, which is about 80 percent complete, has given the PUC greater independence and flexibility to not just bring more staff on board but boost historically low salaries to the point where the agency can now attract new employees and retain experienced professionals, Iwase said.
“We’ve stopped the bleeding,” he said.
The Legislature has given the PUC additional room to grow but it will have to wait on space becoming available in the next couple years. Lawmakers have authorized 65 positions and a $17.8 million budget for fiscal 2016, which started July 1.
The only request the PUC made of lawmakers last session, which ended in May, was continued support for the agency’s internal restructuring.
Iwase has brought on six new attorneys, four more employees for the policy research section and a compliance chief. He’s also filled vacancies for district representatives on Kauai and Maui.
“For the first time in many years, they have the professional staffing that they need, or at least have started to assemble that in a way that will help them to deal with these technical issues,” said Ige, who helped secure the funding as head of the Senate money committee before becoming governor.
There are also key new positions.
Delmond Won is filling a critical role as executive officer, Iwase said. He was director of planning and regulatory affairs at Young Bros., served on the Land Use Commission in the 1990s and the Federal Maritime Commission under President Bill Clinton.
“The pickings were slim,” said Iwase. “But those who did apply had heart, had commitment, and were young. This future we’re creating at the PUC, they’re going to live it. I’m not going to be around a long time.”
In addition to adding positions, Iwase had to stem the tide of turnovers.
“People left the PUC for a reason, and it wasn’t just because of money.” — PUC Chair Randy Iwase
It wasn’t just losing people to the private sector and trying to compete with those wages. Employees were leaving for other state agencies, too.
Iwase said morale was low when he arrived. He said he’s worked to address that by treating the legal team, for instance, as professionals instead of law clerks. One of the new lawyers he’s hired will be joining Tom Gorak, chief legal counsel, during the NextEra evidentiary hearing.
“People left the PUC for a reason, and it wasn’t just because of money and it wasn’t just because of job offers elsewhere,” Iwase said. “You can stay in a place where you believe in what you’re doing even if the pay is not commensurate with the private sector if the work is rewarding and lets you demonstrate your abilities.”
Outside observers who work regularly with the PUC have seen positive changes.
Robert Harris, public policy director of Sunrun, a major solar energy developer, said PUC staff members seem pleased with the additional resources.
“Morale and attitude at the commission has significantly improved,” Harris said.
Iwase agreed, saying, “The staff and the new people coming in have infused us with new energy.”
Morita can trace her efforts to transform the PUC back to 2003, when she was a legislator and chair of the House Energy and Environmental Protection Committee.
She recalled working with the Hawaii Energy Policy Forum on a study identifying the barriers to clean energy policy. Regulation was identified as an obstacle, so the Legislature ordered a management audit of the PUC and Division of Consumer Advocacy, the agency tasked with advocating for the public’s interest in rate cases and other dockets before the commission.
The audit, published in 2004, found that both agencies lacked vision and plans — the same problems identified in an audit 30 years earlier. The audit said that severe staffing shortages could compromise the quality of the agencies’ work and result in delay.
As a state lawmaker, Morita said she worked in 2007 to create new positions for the PUC, which were later funded but then cut due to the recession. In the past couple years, however, the Legislature has been able to direct more resources to the agency and, under Morita’s urging as then-chair of the PUC, pass a bill in 2014 that transferred the agency to DCCA.
“Now the PUC chair has a little more autonomy,” Morita said. “When I was attached to B&F, I had no control over my budget. Every expense had to be approved by the director, which is crazy because you’re spending money that’s already been authorized through the budgeting process.”
She said small clerical errors would come back for corrections and airfare for work-related trips would increase while her staff waited for approval.
DCCA Director Catherine Awakuni Colon, who was appointed by Ige in late December, previously served as the chief legal counsel for the PUC. Her department also oversees the Division of Consumer Advocacy, headed by Jeff Ono.
Ono said it was Morita who laid the groundwork for where Hawaiian Electric — or whatever company may end up running the utilities on Maui, Big Island and Oahu — should be headed.
He noted the PUC’s “inclinations” report published last year that lays out the vision, business strategies and regulatory policy changes required to align the Hawaiian Electric companies’ business model with customers’ interests and the state’s public policy goals, including reducing the reliance on imported fossil fuels.
“I have just the utmost respect for Mina Morita,” Ono said. “She did a remarkable job when she was chair of the PUC.”
While Morita effectively laid the groundwork, Iwase has been successful at getting stagnant dockets moving forward.
“Given the amount of time he’s had in his position and his background, he’s been able to move things along quickly,” Ono said.
Last month, the PUC issued a decision affecting rooftop solar and battery storage issues in the distributed energy resources docket that had sat idle for months.
The 322-page order ended the popular net energy metering program, grandfathering in everyone who already has put photovoltaic panels on their roofs or applied to do so by Oct. 12. It created new options for rooftop solar, but effectively halved the amount of credit that consumers had been receiving on their electric bills for the energy produced by the solar panels on their roofs.
Earlier this month, the PUC issued a nearly 200-page order in the power supply improvement plans docket — another major piece of work that had been gathering dust — that told the Hawaiian Electric companies that they needed to address several shortcomings in their plans and set a timeline for resubmitting them.
“We’re moving forward regardless of who’s in control.” — PUC Chair Randy Iwase
Iwase attributes the movement in these dockets, which he considers just as important as the NextEra merger, in large part to the boost in staff.
“These set the blueprint,” he said. “It’s how we are going to have a 21st century energy industry in the state of Hawaii, and how we’re going to achieve our 100 percent renewable energy goal in 2045.”
There are two other major dockets — decoupling and demand response — that Iwase similarly plans to push.
“We’re moving forward regardless of who’s in control,” he said. “This is the plan they will follow.”
Decoupling was an effort to incentivize investment in renewable energy by moving away from the model of the utility making money off the electricity it sold. In the demand response docket, there’s a focus on establishing mechanisms that encourage electricity consumers to use energy at certain times of the day to help balance the load and better utilize renewable sources.
“The complexity of issues before the PUC right now is mind-boggling,” Morita said.
She compared Hawaii’s PUC to California’s, which has 20 times as many employees.
“We’re more on the cutting edge than any of them and you’re basically doing it with 60 people or less,” she said.
While the PUC has seen a healthy boost in staffing levels, the Consumer Advocate is struggling with limited resources.
“I need more people,” Ono said.
When he took over in January 2011, he had a staff of 12 — roughly half as many employees as the division had before the recession. The current goal is to at least build back up to where the agency once was.
The division is at 17 employees now — a mix of engineers, attorneys, accountants, economists, researchers and clerical workers.
The Legislature authorized 24 positions and $4.16 million for 2016, but it’s been a challenge to fill current vacancies.
“The money is there,” Ono said.
There are openings now for an engineer as well as rate and research analysts. Ono said he’s been trying to fill the engineer position for five years, but the effort has been hampered by the nature of the work and the pay.
“We get a lot of applicants, but then when they find out what kind of work we do they say, ‘no thank you,’” he said.
Instead of engineering analysis, calculating the amount of force a certain structure can withstand or designing water or electrical systems, Ono said his engineers often are reviewing applications filed by an electric or water utility, determining if there’s alternatives to an overhead line, for instance, or other aspect of the proposal that might be able to be improved in a way that makes it more in the public interest.
“We’re extraordinarily busy because of the merger.” — Consumer Advocate Jeff Ono
Plus, staff members occasionally have to appear as witnesses before the PUC during quasi-judicial hearings.
“Some people just do not want to do that,” Ono said, adding that he feels fortunate to have the two electrical engineers that he has.
He’s working to adjust salary schedules to help attract and retain employees. That process took Morita four years.
“There has to be some attention put to the Consumer Advocate,” she said.
Despite his limited resources, Ono said he feels good about the work his staff does and its ability to hit deadlines.
“It is a lot of pressure,” he said. “Right now we’re extraordinarily busy because of the merger.”
Iwase said he has been impressed by what the Division of Consumer Advocacy has accomplished.
“I feel sorry for Jeff. I hope he is allowed to ramp up his staff,” Iwase said, adding that it’s admirable Ono “didn’t lie down and play dead.”
In the NextEra case, the Consumer Advocate has come out against the proposed merger, filing hundreds of pages of testimony explaining why the deal is not in the public’s interest. Many of those reasons are similar to those the governor has shared in his opposition to the deal, including the lack of benefits to customers and losing local control of the utility company to a Florida-based energy giant.
Like the PUC, the Consumer Advocate has relied on consultants to provide expert opinions on the matter.
Before the merger was announced last December, Ono had requested a $700,000 increase in his consultancy budget. Fortunately, he said, a couple of Hawaiian Electric rate cases he’d planned on using a chunk of that money for were abbreviated, so he’s been able to use the funding for the NextEra docket instead.
Ono’s not complaining, despite the stress and long hours he and his staff have been putting in.
“It’s very exciting,” he said, noting the historic nature of the proposed sale of Hawaiian Electric, one of the oldest companies in Hawaii. “I couldn’t think of any other place I’d rather be.”