A bill that initially set out to require state energy regulators to determine there is a “substantial net benefit” in order to approve a utility merger has cleared its final committee hurdle in the House.

The Consumer Protection Committee, chaired by Rep. Angus McKelvey, passed an amended version of House Bill 2567 on Wednesday.

The bill had been criticized last month for lacking a definition of “substantial net benefit,” and drew opposition from Hawaiian Electric Co.

Representative Angus McKelvey on the floor. 18 feb 2015. photograph Cory Lum/Civil Beat

Rep. Angus McKelvey, seen here during a floor session last year, says there should be guidelines for energy regulators to consider in an electrical utility merger.

Cory Lum/Civil Beat

The amended version adopts the terms that the Public Utilities Commission is using as a standard to determine whether to approve the pending $4.3 billion sale of Hawaiian Electric Industries to NextEra Energy.

But water and phone utility companies said that standard is too specific to that case, and PUC Chair Randy Iwase said the commission needs to have flexibility and discretion. So the committee also amended the bill to have it only apply to electrical utility mergers, and only be “guidelines” for the commission to consider, McKelvey said.

The bill was also amended so that it wouldn’t apply to any mergers until 2017, McKelvey said, “so NextEra can’t use it as an excuse to sue the state.”

McKelvey said he was urged to just leave the definition blank and let the PUC come up with a definition, but he said that seemed like abdicating the Legislature’s responsibility.

The bill will go for a vote before the full House next, and if it passed, cross over to the Senate for its consideration.

Here are the terms the PUC is using in the NextEra case that lawmakers have inserted in the bill to help define “substantial net benefit.”

  • Approval of the proposed transaction would be in the best interests of the State’s economy and the communities served by the public utility;
  • The proposed transaction, if approved, provides significant, quantifiable benefits to the public utility’s ratepayers in both the short and long term beyond those proposed by the public utility in recent regulatory filing;
  • The proposed transaction will impact the ability of the public utility company’s employees to provide safe, adequate, and reliable service at reasonable cost;
  • The proposed financing and corporate restructuring proposed in the application is reasonable;
  • Adequate safeguards exist to prevent cross subsidization of any proposed affiliates and to ensure the public utility commission’s ability to audit the books and records of the public utility, including affiliate transactions;
  • Adequate safeguards exist to protect the public utility’s ratepayers from any business and financial risks associated with the operations of the transferee or assignee;
  • The proposed transaction, if approved, will enhance or detrimentally impact the State’s clean energy goals;
  • The proposed transaction, if approved, would potentially diminish competition in Hawaii’s various energy markets and, if so, what regulatory safeguards are required to mitigate such adverse impacts.

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