- Special Projects
Something has been largely missing from the regulatory process to decide whether the largest utility merger in state history can go through: the active voice of the deal’s business and labor supporters.
This is strange given how much has been said by so many different players in the 15 months since the sale’s agreement was announced.
The process, which is aimed at helping the Public Utilities Commission decide whether NextEra Energy will be allowed to buy Hawaiian Electric Industries for $4.3 billion, has been remarkably expansive.
In nearly three months of regulatory hearings, the two parties to the deal have put forward a plethora of employees and experts who have testified in support of the companies’ numerous filings. The companies have also taken out ubiquitous ads in various media.
On the opposing side, the PUC granted intervening status in the case to more than two-dozen nonprofits, counties and competing businesses, among others — nearly all of which came out against the deal. Being intervenors allowed them to put forward their arguments at the hearings, which will resume live on Olelo TV on Monday.
And before the hearings even began, the public got a chance to weigh in at seven “listening sessions” around the state involving utilities regulators and energy executives.
While NextEra Energy has distributed a gradually growing list — now at more than 50 businesses, institutions and unions that support the deal — the support has largely been limited to formal written statements, a bit of sign waving and the occasional opinion piece in the local newspaper. Other than that, in the public sphere, such supporters have remained largely passive.
Civil Beat called numerous businesses and labor groups who have publicly expressed support for the merger to get their perspective on why they like this deal. Many of the most prominent companies or organizations did not reply.
A few, like the Hawaii Government Employees Association and the Hawaii Business Roundtable, declined to put forward anyone to speak about their support for the merger.
But others were happy to explain why they are supporting the merger.
“The fate of the construction industry is really tied to the cost of energy,” said Tyler Dos Santos-Tam, the executive director of the Hawaii Construction Alliance, which represents about 15,000 workers.
It is one of the most energy-intensive industries in the state, he said. After all, building a home involves substantial amounts of equipment powered by electricity.
“When NextEra came in and said, we want to lower the cost of energy, we sat down and talked to them,” Dos Santos-Tam explained.
The Florida-based company, which has had a foothold in renewable projects in the islands for several years, convinced the alliance it is committed to bringing costs down.
He also expressed appreciation to NextEra for reaching out to trade unions and making clear they are on the same page about using cleaner fuels and supporting the path toward more renewable energy in the islands.
And in January, Dos Santos-Tam said Bill Yeager — NextEra’s executive vice president of engineering, construction and integrated supply chain — came to Hawaii for talks. Local labor representatives highlighted the qualities of their “well-trained local work force” and asked what NextEra “would need from our union members here in Hawaii. We want to make sure we are aligned.”
Dos Santos-Tam said his labor alliance — comprised of the Council of Carpenters and various trade unions that are also part of the national unions that represent them — has reached out to allies on the mainland to learn about their experiences working with NextEra on renewable energy projects.
They talked to members of associated unions who took part in building one of the nation’s biggest solar farms in Riverside County, the Genesis Solar Energy Project in California — which is operated by a subsidiary of NextEra — and said the response was favorable.
Here in Hawaii, the alliance’s carpenters, laborers and operating engineers work in conjunction with solar and wind farms, and would stand to benefit from more utility-scale solar projects, he said.
But his group’s support isn’t based on hard promises of jobs from NextEra.
“We haven’t talked about any explicit projects or any number of employees, but knowing what they’ve said in public about their plans, we can plainly see it will result in a lot of construction activity, not only on the power generation side but also in modernizing the grid.”
In the bigger picture, the head of the Construction Alliance noted the massive challenges involved in updating the state’s electrical systems and building the modern energy networks that will allow the state to meet its renewable goals.
He also noted the less challenging, but labor-intensive, tasks that are necessary, like replacing telephone poles or relocating wires underground.
Dos Santos-Tam also spoke of opposition to the merger over the supposed loss of local control to a company that is 4,800 miles away.
“I understand that, but here we are after 100 years of local control and people are deeply dissatisfied. What’s next?” he asked. “I think the status quo is not acceptable, so we are open to NextEra coming in.”
The Building Industry Association empathizes with NextEra as the company tries to clear regulatory hurdles, seeing it as similar to builders’ frustrations with red tape, according to BIA President Craig Washofsky.
“We may intersect with regulators more than many industries, dealing with the Department of Permitting and Planning; developers dealing with the multitude of entities to get zoning and permission. Anything that lessens that is a good thing,” Washofsky said.
So how did the association decide to back the deal?
“We talked to our members that we felt would be impacted the greatest by the sale — those were our (solar-sector) members — and asked if they had any concerns one way or the other, and got no negative feedback,” said Washofsky.
Asked if the BIA received positive feedback, he said he didn’t know but, “There were certainly no objections.”
More broadly, he said, the association looks at the merger as a business transaction and “struggled to see what the concerns were” — especially since regulators must generally OK rate increases regardless of who owns the utility.
“The question was: Where is the problem?” said Washofsky.
Even now he has a hard time understanding objections to the transaction, particularly since the International Brotherhood of Electric Workers came out in support of the deal.
“If the folks who are making sure the lines are up and running, and at the power plants, if their leadership is on board with it, that’s encouraging to me,” he said.
“One of the biggest challenges that businesses in Hawaii face is insular thinking. People are born, raised and go to school here, and go into the work force here without being exposed to best practices from other parts of the country or the world. It is really easy to do and a real danger to any business.”
So, he said, “When a company like NextEra that has been successful from another part of the country” enters Hawaii, there is potential for improvement.
For Steve Colón, Hawaii division president of Hunt Cos., the deal is largely about financing.
“From what I can tell, man, we really need to get this grid updated,” said Colón who is convinced that the electric grid is going to need “a major, major investment. Knowing that, having a company that can finance those projects with a very big balance sheet, that borrows money at a lower cost of capital, would be better for the ratepayers.”
For him, NextEra is accustomed to grid improvements on a “whole other order of magnitude.”
Bu contrast, he said, “If HECO is saddled with all of these costs, it could exacerbate a very bad situation since we are already paying by far the highest rates in the country.”
He noted that some critics cite the low penetration of rooftop solar on NextEra’s home turf in Florida as a sign of a lack of commitment to renewable energy.
But Colón pointed out that Hawaii has been so favorable to rooftop solar partly because Hawaiian Electric’s rates have been so high. Throw in generous tax incentives and the rate the utility pays people who feed energy into the grid, and the payoff point for installing rooftop solar was, until recently, just four or five years. That is why Colón put panels on his home in the islands.
A regulator-approved reduction in the rate that Hawaiian Electric pays rooftop solar energy producers for their power, has stretched out the payoff point by several years.
But people in Hawaii who can afford to put money out for rooftop photovoltaic panels still have a great incentive to do it. For customers of Florida Power & Light, a NextEra subsidiary, who pay about one-third the average rate of Hawaiian Electric customers, Colón believes there is little incentive to do so.
“What homeowner is going to want to put up rooftop solar if their payoff is 20 years? If I was in Florida, I wouldn’t put up rooftop solar.”
Critics of the Florida operation, say that the company has too much power over that state’s regulators, and that it is using hardball techniques to prevent rooftop solar from competing in the Sunshine State as well as it does elsewhere.
Colón expressed concerns that the ongoing regulatory process NextEra is going through could end up worsening the state’s image.
“When I see us putting these people through the grind, I worry this fosters an anti-business-friendly sentiment.”
Mechanical engineer Ned Davis is the CEO and founder of Maui Innovation Group — a small research and development business focused on inventions and projects. He has a more detached attitude about the merger.
He noted that capital markets are good right now and interest rates remain low, making this a great time for Hawaii to make the big capital investments he believes are necessary to satisfy the state’s ambitious renewable energy goals.
Davis’ support isn’t, he said, about self-interest since the merger is unlikely to have much impact on his company. He just believes that Hawaii will become more renewable sooner with NextEra.
Asked if he knows of business owners or others on Maui who are also supportive, Davis suggested that other than employees of Maui Electric Co., supporters of the merger there are “few and far between.”