When it comes to something as crucial in our lives as electricity, can Hawaii trust outsiders to do the right thing?
That was the fundamental question emerging Monday from the high-stakes hearing at the Neal S. Blaisdell Center to decide if NextEra Energy’s proposed $4.3 billion purchase of Hawaiian Electric Industries will be approved.
The Public Utilities Commission decision will shape the path that the islands pursue in modernizing the electrical system for decades to come.
On the fifth day of what are scheduled to be 12 days of hearings to assess whether the deal is in the public interest, NextEra Energy Hawaii President Eric Gleason faced a third barrage of questions from various intervening parties.
An array of issues was raised in public, and in a brief pair of sessions closed to the public and the media because they touched on confidential documents, but the question of why Hawaii should trust mainland interlopers — with all of the historical weight that carries — became a dramatic focal point.
“So the first question I have for you Mr. Gleason is why should I trust you? Why should I trust NextEra.” — PUC Chair Randy Iwase
The last person to question Gleason was PUC Chairman Randy Iwase, who asked the top representative of NextEra about trust.
“From the kingdom to the territory to the state, we have heard many promises (from) big companies coming in, taking over companies in Hawaii,” Iwase said. “And so I have to deal with that, judge it through that prism.”
Iwase said that his historic prism applies to the list of 85 commitments that NextEra has put forward to facilitate acceptance of this merger. He described the commitments as “nice words.”
The PUC chairman highlighted the almost inherent skepticism that locals sometimes direct toward large outside forces in the islands.
“We are thousands of miles away and, as you’ve probably learned by now, it takes a while for people who come from the outside to be trusted in this small state of ours,” said Iwase. “So the first question I have for you Mr. Gleason is why should I trust you? Why should I trust NextEra?”
Gleason, who has spent much of the last five years in the islands working for NextEra, acknowledged the challenges facing mainland companies.
“People here in Hawaii are used to knowing the people they come into contact with, or they’ve met before or they know someone who knows them,” said Gleason.
There are, he suggested, “fewer degrees of separation” between people in the islands than on the mainland.
“We understand that if you come from outside, you have a hurdle to overcome. … We expect that we aren’t going to totally get over that hurdle before this merger closes,” he said, quickly adding, “We hope it does close.”
But, the local head of NextEra Energy added, “We hope we’ll get far enough over the hurdle that you’ll say, ‘We trust these guys.’”
The trust-building process will likely take years, largely because “it is going to take time for us to demonstrate that we will deliver on all the things we say we’ll deliver on,” Gleason said.
“So what we’re saying, Mr. Chairman, is not to totally suspend your disbelief and ‘you can totally trust us like you’ve known us your whole life.’ We know that’s just not realistic.”
But Gleason pointed to the thousands of questions that he and his company have answered — or at least responded to — in court documents, resulting in what NextEra calculates as tens of thousands of pages of filings.
“I believe,” Gleason said, “we’ve opened ourselves up.”
While several of the original intervening parties have come to agreements in which they have abandoned their opposition to the merger, about two dozen continue to express varying degrees of opposition.
Some of their most frequent criticisms are that NextEra hasn’t offered enough guaranteed cost-relief for customers who pay the highest rates in the nation and that the company isn’t dedicated enough to the state’s ambitious renewable energy goals. There are also critics who argue that NextEra’s culture involves dominating the means of energy generation, which goes against a thriving culture of rooftop solar in the islands.
Gleason, who has repeatedly rebutted those and other criticisms in recent months, testified that he hopes “we will have earned enough of your trust” for the deal to go through.
At one point, Iwase asked what guarantee Gleason could give him that NextEra’s 85 commitments will be fulfilled.
Gleason insisted that his company has a track record of delivering on its commitments in other places, especially in the company’s base in Florida. And secondly, he said, unlike the off-island companies that have come in “and screwed things up,” a NextEra-owned Hawaiian Electric would still be restrained by regulators.
So, if the power company fails to deliver on its commitments, Gleason told the commission, “it is in your power to deliver consequences.”
But Iwase pursued the issue of confidence more deeply. “Let me give you an example on trust,” he said, suggesting that it has become clear that NextEra Energy and Florida Power & Light “have no expertise” in rooftop solar.
Iwase asked for a guarantee from Gleason that NextEra’s professional culture will change to suit a state with a more inclusive take on the alternative power source. Hawaii has more rooftop solar per capita than any other state, while NextEra’s parent company in Florida has fairly negligible rooftop solar penetration among its customers. NextEra argues this is because its prices are so low that rooftop solar doesn’t make sense for customers.
Iwase also asked what expertise NextEra could bring to bear on Hawaii’s rooftop solar challenges, given how little there is in Florida.
Gleason pointed to his company’s modern grid in that state.
“Now the modern grid in Florida will not look exactly like the modern grid in Hawaii, but you don’t have a modern one in Hawaii and you want (one).” Beyond the grid, he pointed to NextEra’s technical expertise, specifically citing its experience installing and managing widespread smart metering.
Iwase tried to nail down who would be the most significant decision-makers in a NextEra-owned Hawaiian Electric and, by deduction, who the PUC would really be dealing with if the acquisition goes through.
“We understand that if you come from outside, you have a hurdle to overcome. … We expect that we aren’t going to totally get over that hurdle before this merger closes.” — NextEra Hawaii President Eric Gleason
Gleason used a sports analogy to convey how things work for NextEra in Hawaii, suggesting that, for now, he is like “the quarterback,” NextEra Energy CEO Jim Robo in Florida “is like the coach” and the board of directors is akin to the owners of the team. He noted that there is an array of other people with various forms of expertise who share it as necessary.
Iwase was particularly interested in Robo’s role in the 85 commitments that the PUC would, if it green-lights the purchase, need to monitor.
Gleason said that Robo signed off on the commitments that NextEra came to the commission with. He said that if there were changes to NextEra’s promise to save customers $60 million over four years — like if NextEra were to argue that “financial duress” required it to ask the commission to allow a rate increase — Robo would be the final decision-maker on his company’s side.
Just before Iwase’s questioning, Commissioner Michael Champley also brought up trust — and whether it has eroded or been entirely lost for HECO’s customers.
“It has eroded significantly,” Gleason replied, “but not (been) lost.”
Asked what might restore it, Gleason said the key would be to drive rates down, shift toward cost-effective renewable energy, demonstrate that a NextEra-owned company remains a locally managed company and provide reliable service.
At other points in his testimony, Gleason suggested that modernizing the grid and using liquefied natural gas could help to improve service and reliability, and eventually bring down prices — although with remarkably low oil prices, it isn’t entirely clear how much of a money saver LNG might be.
A difficult component of that solution, Gleason acknowledged, is time. He and other experts have said that it is very difficult to bring down prices as long as the vast majority of electricity in the islands is produced by burning fuel oil. As long as that is the case, electricity prices will, largely, be at the mercy of volatile oil prices.
That said, Gleason confirmed that bringing electricity prices down would be a “strategic imperative” for NextEra in Hawaii.
A decision on the merger deal is expected around the middle of 2016.