NextEra Energy and Hawaiian Electric Industries have their work cut out for them in the upcoming evidentiary hearing before the state Public Utilities Commission.
Gov. David Ige’s administration, the Consumer Advocate, solar companies, environmental groups and others intervening in the docket have all lined up against the proposed $4.3 billion merger.
The trial-like hearing starts Monday at Blaisdell Center. It’s scheduled to last 12 days over three weeks, but it could go longer if necessary. PUC Chair Randy Iwase has said a decision by the three-member commission isn’t expected until June or later.
If the merger goes through, it wouldn’t just represent the largest utility deal in Hawaii’s history, it could have broad implications for the economy and the ecology of the state for decades to come.
Hawaiian Electric serves 95 percent of the state’s population, and internally, the deal could affect thousands of jobs with the company, as well as the financial interests of shareholders, including pensioners.
Over the past week, the parties have presented pre-conference hearing briefs to the commission — effectively their opening arguments in the case. The PUC cut out opening arguments from the hearing so the parties will dive right into cross-examining each other’s witnesses.
Gregg Kinkley, deputy attorney general representing the Department of Business, Economic Development, and Tourism, made a point in the agency’s pre-conference brief that all the parties would likely agree with.
“The right to serve as the electricity provider to Hawaii, Lanai, Maui, Molokai and Oahu is a serious matter,” he said. “If approved, the proposed change of control will have a substantial impact, for decades to come, on critical matters related to the State’s clean energy goals, policies, and objectives, as well as the State’s efforts to support the increased, economically- and technically-viable use and development of Hawaii’s renewable energy resources.
“In light of the State’s transformation into a national leader in developing the next generation of power delivery systems, the significance of the right to serve Hawaii customers in the future is particularly pronounced,” he said.
Critics, which include DBEDT, say the deal offers little to the public and would just make corporate executives and shareholders richer. They also have concerns about losing local control to a huge energy firm based in Florida, and question what NextEra’s plans for Hawaii really are given what they say is a the lack of transparency.
The utility companies naturally disagree. They argue that NextEra brings a wealth of experience and increased buying power that will help the state achieve its 100 percent renewable energy goal by 2045 while lowering customers’ bills.
The state Office of Planning, which considers the electric utility to be “the single most important business in Hawaii,” says NextEra’s commitment to save ratepayers $60 million over five years is “peanuts” compared to the $568 million that shareholders are set to receive if the deal goes through.
The trial-like hearing starts Monday at Blaisdell Center. It’s scheduled to last 12 days over three weeks.
“The bottom line is there is nothing in the law that says a public utility commission must sit idly by while, for example a person in Tallahassee, Maine or London who bought shares of HECO stock the day before the deal was announced is somehow entitled to a control premium versus an 80 year old rate and tax payer who faithfully paid her electric bill and taxes for 60 years so that HECO could make its guaranteed profits gets nothing,” Terrance Revere, attorney for the Office of Planning, wrote in the agency’s pre-hearing brief.
NextEra and HEI point to $1 billion in benefits to electric customers and the local economy that experts estimate will be realized over the first five years.
“While some parties have challenged minor aspects of these total benefits (such as small offsets stemming from potentially reduced local purchases), those allegations are unfounded and do not even begin to undermine the very large benefits the merger will produce, which even critics conclude are in the many hundreds of millions of dollars,” attorneys for NextEra and HEI wrote in their pre-hearing brief.
The Division of Consumer Advocacy, headed by Jeff Ono, said a careful review of the dozens of commitments and “speculative promises” the utility companies have made shows they don’t hold water.
The agency took a shot at the utilities’ “experience” argument, pointing out that Hawaiian Electric has connected 54,000 homes and businesses with rooftop solar out of the 450,000 customers it serves on Oahu, Big Island and Maui. That gives the company a photovoltaic penetration rate of 12 percent.
By contrast, Florida Power & Light, NextEra’s principal subsidiary, serves 4.2 million homes but only 2,961 have solar PV, a 0.07 percent penetration rate.
“If anything, the Hawaiian Electric Companies will be exporting its institutional experience to help NextEra should solar PV penetration rates increase in FPL’s service territory,” Jon Itomura, attorney for the Division of Consumer Advocacy, says in the pre-hearing brief.
Last month, the PUC ended the popular net energy metering program that let residents with PV systems sell excess energy back to the electric companies at the full retail rate. The PUC order grandfathered in customers who either already have rooftop solar systems or had applied to install one prior to Oct. 13.
The PUC says rooftop solar savings should benefit all electric customers, not just the resident or business who can afford to install a PV system.
The commission created a new option to allow customers to export excess energy to the grid as needed but the energy credits on their monthly bills will be roughly half the rate that they were under NEM. And even the new option has a cap of 25 megawatts, which is roughly 4,500 new PV systems.
Solar companies expect to hit that cap by May, if not sooner. The Alliance for Solar Choice, co-chaired by John Stanton of Sunrun and Bryan Miller of Solar City, appealed the decision in court.
Robert Harris and Tim Lindl of TASC say in the group’s pre-hearing brief that the proposed merger amounts to a stronger version of Hawaiian Electric’s “outdated vertical monopoly business model that will be only more challenging to regulate.”
Sierra Club, represented by Earthjustice, struck a similar chord.
“As the largest environmental and clean energy membership organization in the state of Hawaii, Sierra Club does not believe the takeover will enhance Hawaii’s clean energy goals,” attorneys Isaac Moriwake and Kylie Wager said. “Rather, it will undermine those goals by entrenching the vertical monopoly model of the past, rather than providing a sustainable and progressive model that the Commission and others in Hawaii have been demanding.”
A few of the more than two dozen intervening parties in the case bowed out in the weeks leading up to the hearing. The International Brotherhood of Electrical Workers 1260 withdrew last month after negotiating a deal with NextEra to ensure the company would train current and future members for new jobs and not lay off anyone for at least two years after the sale goes through.
Below are the pre-hearing briefs filed by NextEra/HEI, the Consumer Advocate, Office of Planning, Sierra Club, TASC and the state Department of Business, Economic Development and Tourism.