Hawaiian Electric Co. officials said they aren’t exactly sure what “substantial net benefit” means, but they know they don’t want state lawmakers to require the Public Utilities Commission to use that standard for determining whether to approve a utility merger.

Kevin Katsura, HECO’s assistant deputy general counsel, gave the House Energy and Environmental Protection Committee, chaired by Rep. Chris Lee, a list of reasons to not pass House Bill 2567 before the committee went ahead and did so.

Katsura cautioned against unintended consequences, highlighted the need for energy regulators to have the discretion to establish reasonable criteria for specific mergers and said the PUC has already adopted the commonly used “public interest” standard that, at a minimum, ensures a merger will have no net harm.

Rep. Chris Lee questions Kevin Katsura of Hawaiian Electric, Tuesday.
Rep. Chris Lee questions Kevin Katsura of Hawaiian Electric, Tuesday. Cory Lum/Civil Beat

Plus, Katsura said, “It is also unclear what ‘substantial net benefit’ means.”

He’s likely not alone there, and the legislation doesn’t define it. The bill also doesn’t say who should be guaranteed a substantial net benefit, although the state Consumer Advocate argued in favor of ratepayers.

The bill would specifically protect the commission’s ability to set reasonable criteria for specific mergers. But there’s debate over whether this new standard would apply to the pending $4.3 billion sale of Hawaiian Electric Industries to Florida-based NextEra Energy.

The PUC, currently in the middle of a quasi-judicial hearing on the proposed merger, expects to make a decision sometime this summer; but it could be later. The legislative session ends May 5.

Katsura said there would be “due process and constitutional concerns” in applying the standard retroactively, but Lee maintains that it would and should apply to the NextEra-HEI case.

Lee pressed Katsura on why Hawaiian Electric doesn’t support being held to a legal standard of substantial net benefit, but Katsura kept coming back to the PUC needing discretion and that the agency already requires “significant, quantifiable benefits to the HECO Companies’ ratepayers” in the NextEra buyout.

“We strongly support fixing this right now.” — Mickey Knox, Consumer Advocate staff attorney

Consumer Advocate staff attorney Mickey Knox said the office hasn’t done a legal analysis on the bill to know if it would apply to the NextEra case. But the Consumer Advocate does support having a substantial net benefit for ratepayers as the standard in the NextEra merger and future cases.

“We strongly support fixing this right now,” he said.

PUC Chair Randy Iwase declined to comment because he didn’t want to say anything that might affect the NextEra proceedings and because he wasn’t sure whether the bill would apply to that case.

Katsura said that adopting a “substantial net benefit” standard could set a precedent. He pointed at the 2006 approval of the sale of The Gas Company to Macquarie Gas Holding, and the $4.1 million that sale saved customers in rate credits.

“Had the commission adopted a ‘substantial net benefit’ standard it would have not only limited its discretion, but also established a target of what is ‘substantial,'” he said.

Knox said if that type of precedent is indeed set, it would be a good thing for consumers.

House Bill 2567 now heads to the Consumer Protection Committee, headed by Rep. Angus McKelvey.

Eric Pape contributed reporting to this story.

About the Author